Do you have any overseas trips planned?

If so, please take note of the following tips to make sure your trip doesn’t cost you more than it need to.

Some clients decide to cancel their private health insurance for the period they are overseas.  This might save some premium but it can cost much more with the imposition of the Medicare Levy Surcharge (which is charged proportionally on the number of days for which private health insurance is not held at rates from 1% to 1.5% depending one’s level of income).  This is subject to an income threshold of $90,000 for singles and $180,000 for couples (add $1,500 for every child after the first child).

Senior Health Concession Card holders also need to be aware that they will have their card cancelled when they are overseas for more than six weeks.  This happens automatically as the Passport Control pass on their data to Centrelink.

Or perhaps your kids are going off to explore the world for a year.  The trip could cost them less of they go at the right time.  If they left in July and returned in June, then they would have a year with no income and waste the tax free threshold of $18,200.  If they leave in January and return in December, they will be able to use two tax free thresholds and not leave the first tax bracket in either year.  If your child is earning $50,000, leaving in January rather July will save them almost $7,000.

You have to be careful as to what you think you have heard on Budget night.

You have to mindful of three things:-

1. They announcement are not law, they are only announcements.  It may be some time before the legislation passes, it may not ever pass or may be slightly or even substantially different.
2. No matter who is in power, the good news items always tend to have a delayed start date; whereas the bad news items start seemingly straight away.
3. Some of what is reported is not true or over simplified.  What seems to be an opportunity turns out not to be available or only relevant to certain groups.

At MRS, we will spend the next few days pouring through the detail before releasing our detailed analysis of the Budget and what it means to our clients.  That briefing appear will be filled with tips and traps and will be written in plain English.

Please let is know if you would like a copy e-mailed to you.

Travel expenses area tax auditor’s delight.  So what do you need to do?  The basics are:-

• One must keep written or scanned evidence of all expenses when away from home for more than one night.
• If one is travelling overseas or away for more than six nights within Australia, then a travel diary must be keep. Note the word must; it is not an optional requirement.  No diary, no claim.
• Travel diaries can be bought at most newsagents. The simplest things to say is fill in each column to each row, but it is worth noting that one must record:-  – the nature of the activity.  – the day and time that the business activity commenced.  – how long the business activity lasted.  – the name of the place where you engaged in the business activity.
• Collect as many business cards and brochures as you can. Photos are also great proof of what you did.

What if the trip is partly private and how might costs be split?  These are my views as the ATO provides surprising little clarity on this matter:-

• If one goes for a conference to say Europe, then such a long haul means that it is unreasonable to expect one to fly in the day before and then spend say four days sitting in a darkened room. Arriving say two days early does not in my view change the purpose of the trip.  Consequently, the cost of the whole flight remains fully deductible.
• In my view, if one stays on for a day and/or it coincides with a weekend, the trip remains fully deductible.
• The costs incurred on the work/conference days are deductible such as accommodation and food (but not excessive alcohol).
• Sight seeing trips are not deductible.
• What if one attends a week long conference but enjoys a week’s holiday beforehand or afterwards? Clearly the holiday is not deductible.  However, it also raises a question as to whether the whole air fare can be claimed.  Unless there is some compelling counter argument, the air fare would need to be apportioned on a proportional days basis.
• What if one’s partner comes along to the conference or business trip. One method is to only claim half of the accommodation costs.  Another method which I subscribe to is to find out the single rate and claim that – as that is what would have been incurred but not for the partner.  In some cases, it is the same rate.  Make sure you keep the evidence of the alternative room rate.

A common problem is obtaining receipts in some countries.  Thankfully, the ATO provides relief to this problem by allowing employers to pay their employees (which can includes the directors of a company) a daily travel allowance.  The ATO annually sets out daily rates that employers can pay employees to cover their daily travel costs of food, travel and other incidental expenses.  There are rates for Australia (which include accommodation) and overseas (which do not include accommodation costs as they must be fully substantiated).  Please ask us if you would like a copy of the current year rates.  There are differing rates for different areas with higher rates applying to higher costs centres and levels of salary.  Moreover, an employee is exempt from substantiation if they do not claim more than the allowance paid to them.

As it is an allowance, it must be treated as such in your payroll system, be reported within W1 on the next BAS and shown as an allowance on the end of year PAYG Payment Summary.  Please ask us if you would like help in setting this up correctly.

Please remember that as it is an allowance, this method can’t be used by those running a business in their own name or by partners in a partnership.

AT MRS, we will spend today planning for your success tomorrow.