Domestic Travel Tax Deductions

Tax deductions for work related travel can be confusing and complicated.  Here’s a brief summary of what records you need to keep:

Generally you need to keep written evidence, i.e. receipts to claim a deduction for work related travel.  Where the travel is more than 6 nights you will also be required to keep a travel diary.  However, there are exceptions to this where the deduction you claim is no more than the reasonable daily allowance set by the ATO and the following apply:

  • you are required to travel for work
  • you receive a travel allowance from your employer for the days you are travelling
  • you spent the money on accommodation, food, drink and incidentals and were not reimbursed for these expenses.

So, where you have received a travel allowance by your employer AND your claim does not exceed the reasonable daily allowance you do not need to keep a travel diary or written evidence.

However, where the claim exceeds the reasonable daily allowance then you will need to keep all written evidence (not just for the amount over the reasonable allowance) and keep a daily travel diary when the travel is 6 or more nights in a row,

If you do not receive a travel allowance from your employer:

If your employer does not pay you a travel allowance you need to keep all written evidence and a keep a daily travel diary when the travel is 6 or more nights in a row.

What is a travel diary:

Your travel diary should document the dates of travel including the places visited with time and duration noted of the activities you did that day.  The purpose of the diary is to work out the work related days of your trip.  The travel diary is only needed where the domestic travel is for 6 nights or more in a row.

Although a travel diary may not be required, keeping one can assist you later with working out the work related part of your claim should you have had some personal days in your travel and also provide some evidence of your work travel should the ATO decide to check your deduction.

What are the reasonable allowance rates:

The ATO sets standard daily rates for domestic travel covering the different cities in Australia.  The daily rate covers accommodation, food, drink and incidentals.  If you receive a travel allowance you can check with your employer what daily allowance you have been paid and should also check if it is the ATO daily allowance.  Your employer could pay you more than the ATO allowance, however your substantiation requirements are still based on the ATO reasonable allowances.

If you are an employer:

Travel allowances should be paid prior to your employee travelling.  We can help you work out the correct allowance.

Jobkeeper 2.0 – new eligibility and new rates

On 15 September 2020, the Treasury has released the Amendment Rules in relation to the Jobkeeper extension (Jobkeeper 2.0) that was legislated on 16 September 2020. The new extension rules will apply from 28 September 2020 onwards to 28 March 2021 and it will affect all Jobkeeper participants, including employees and business participants. 

In short: 

  • Businesses need to reassess their eligibility criteria from 28 September 2020 onwards in order to continue to qualify for Jobkeeper, and again on 4 January 2021. 
  • Payment rate will be reduced for both employees and business participants, and be split into tiers, depending on the number of hours worked 

Eligibility criteria for Jobkeeper 2.0 – decline in turnover test 

In order to be eligible for the JobKeeper Payment from 28 September 2020, businesses will have to meet a further decline in turnover test for each of the two periods of extension, as well as meeting the other existing eligibility requirements for the JobKeeper Payment. 

Between 28 September 2020 to 3 January 2021 (Jobkeeper extension 1), businesses will need to demonstrate that their actual GST turnover has fallen in the September quarter 2020 relative to a comparable period. 

Between 4 January 2021 to 28 March 2021 (Jobkeeper extension 2), businesses will need to demonstrate that their actual GST turnover has fallen in the December quarter 2020 relative to a comparable period. 

For both periods, businesses need to prove that their turnover in the current quarter has dropped by: 

  • More than 30% when compared to a comparable period if your aggregated turnover is under $1 billion 
  • More than 50% when compared to a comparable period if your aggregated turnover is over $1 billion 

For businesses that do not have a relative comparable period (or have special circumstances), the ATO will release information on the alternative test methods. 

It is important to note that the BAS lodgement due dates (September & December 2020) are after the period where businesses can assess and declare the Jobkeeper eligibility to ATO (usually 14 days after end of month), this means that businesses need to take action soon to assess their eligibility and ensure they satisfy other conditions in order to continue being eligible for Jobkeeper extension payments after 28 September 2020. 

Payment rates 

Current Jobkeeper payments are $1,500 per fortnight for both eligible employees and business participants.  

From 28 September 2020 onwards the payment rates will be split into 2 tiers: 

  • Tier 1: For employees and business participants who work 20 hours or more per week on average in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and for eligible business participants who were actively engaged in the business for 20 hours or more per week on average: $1,200 per fortnight 
  • Tier 2: For all other employees and business participants: $750 per fortnight 

From 4 January 2020 onwards the payment rates will be dropped further: 

  • Tier 1: For employees and business participants who work 80 hours or more in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and for eligible business participants who were actively engaged in the business for 80 hours or more in February and provide a declaration to that effect: $1,000 per fortnight 
  • Tier 2: For all other employees and business participants: $650 per fortnight 

Other conditions 

Wage condition: Employers will continue to be required to make payments to employees equal to, or greater than, the amount of the Jobkeeper Payment (before tax), based on the payment rate that applies to each employee. 

Employee eligibility 

Employees are eligible in the extension period if they:  

  • are currently employed by an eligible employer (including if you were stood down or rehired)  
  • were for the eligible employer (or another entity in their wholly-owned group) either:  
  • a full-time, part-time or fixed-term employee at 1 July 2020; or  
  • a long-term casual employee (employed on a regular and systematic basis for at least 12 months) as at 1 July 2020 and not a permanent employee of any other employer.  
  • were aged 18 years or older at 1 July 2020 (if you were 16 or 17 you can also qualify if you are independent or not undertaking full time study).  
  • were either:  
  • an Australian resident (within the meaning of the Social Security Act 1991); or  
  • an Australian resident for the purpose of the Income Tax Assessment Act 1936 and the holder of a Subclass 444 (Special Category) visa as at 1 July 2020.  
  • were not in receipt of any of these payments during the JobKeeper fortnight:  
  • government parental leave or Dad and partner pay under the Paid Parental Leave Act 2010; or  
  • a payment in accordance with Australian worker compensation law for an individual’s total incapacity for work.  

Employee can only claim Jobkeeper payment from one employer. Only under very limited circumstances can one employee change from one employer to another to claim Jobkeeper payment. 

Employees will continue to receive Jobkeeper payment if their employers satisfy the wage condition (see above) and are eligible to claim Jobkeeper payment on their behalf. 

Business owners can continue to receive Jobkeeper payment if their businesses satisfy the turnover test and they are not a permanent employee of another employer. 

Action points 

From 28 September 2020, all of the following must be done: 

  • work out if Tier 1 or Tier 2 rate applies to each of your eligible employees and/or eligible business participants 
  • notify us and your eligible employees and/or eligible business participants what payment rate applies to them 
  • during Jobkeeper extension 1 – ensure your eligible employees are paid at least 
  • $1,200 per fortnight for Tier 1 employees 
  • $750 per fortnight for Tier 2 employees 
  • during Jobkeeper extension 2 – ensure your eligible employees are paid at least 
  • $1,000 per fortnight for Tier 1 employees 
  • $650 per fortnight for Tier 2 employees. 
  • And, at the same time, remember to complete your September monthly declaration and submit it by 14 October 2020. 

Point to note 

You do not need to re-enrol for the Jobkeeper extension if you are already enrolled for Jobkeeper for fortnights before 28 September 2020. 

You do not need to reassess employee eligibility or ask employees to agree to be nominated by you as their eligible employer if you are already claiming for them before 28 September 2020. 

You do not need to meet any further requirements if you are claiming for an eligible business participant, other than those that applied from the start of Jobkeeper relating to holding an ABN, and declaring assessable income and supplies. 

Help is here! 

If you require assistance with assessing your eligibility to the Jobkeeper extensions, lodging monthly declarations and any other questions in relation to Jobkeeper – we are here to help! Give us a call or email and help will be on the way. 

Disclaimer: Please note that the information above is accurate as of 17 September 2020, any further updates will be included in our other blog posts.

7 Ways to improve your Xero File

When running a business, business owners are always looking for ways to minimise their time spent on administrative tasks. That’s where Xero comes into play as they have a lot of powerful features that business owners can use to improve their efficiency in running their books so they can focus on generating more profits.

Below are 7 features Xero offers to improve your efficiency:

Cloud access

With Xero available on the Cloud, you will be able to access your Xero file any time, anywhere as long as you have a laptop or smart phone with internet access. You can run your business on the go and are no longer stuck at your office work desk.

Bank feeds

Automatic bank feeds allow your bank to send through bank transactions to your Xero file directly. It happens behind the scenes daily – you wouldn’t even notice it! This vastly improves the timeliness of reconciling business transactions, not to mention more accuracy (less typo!) in the data recorded in Xero.

Bank rules

With automatic bank feeds, many business owners will be able to reconcile their bank transactions daily, providing them with an up to date overview of how well their businesses are travelling. Generally, some transactions are repetitive, such as monthly subscription fees, or certain types of income (e.g. Shopify payments paid via Paypal for example). As these transactions will always be reconciled to certain accounts, you can set up bank rules so Xero can suggest the rules to you as long as the criteria is met. This again will save considerable amount of time for business owners – instead of manually typing in the details during reconciliation, a bank rule can be applied which helps pre-fill certain fields, all you need to do is to click “OK” and that’s it!

Tracking categories

For businesses who have multiple streams of income, setting up tracking categories allows them to see the profitability of each stream of their business, and they can tailor different strategies to improve each business stream.

Online File storage – Hubdoc

Hubdoc is the online file storage that is available to any Xero standard subscriptions. It allows business owners to upload their a photo or copy of their bills onto the platform, where Hubdoc will analyze and “read” the bills and convert them into a draft bill for you to process and publish in Xero. Once they are published to Xero, depending on your preference, you can then reconcile each bill against a bank transaction straight away. This is a huge time saver for those who have a lot of bills to process, and improves the accuracy by reducing the amount of typing required.

Dashboard customization

Because every business is different in terms of their needs Xero allows business owners to customize their dashboards so they can see what they want to see. A few items you can add on the dashboard are main business bank accounts, invoices owed to you, bills you need to pay and watchlist of accounts that are important for you to monitor.

Payroll access

You can also manage your payroll through Xero and comply to the ATO’s Single Touch Payroll requirements. With a few clicks you can setup a new employee, process and file a payrun with the ATO. It also provides your employees with a Payroll portal where they can login, record when they work on a timesheet, update their personal details, request and apply for leave and view their payslips.

Need help with your Xero? We provide one-on-one Xero training to tailor suit your needs, we also offer ongoing assistance to answer any day-to-day Xero questions you may have.

The third wave of the Stimulus Package – JobKeeper payment

Today our Prime Minister and Treasurer announced a third wave of their Stimulus package – the Jobkeeper payment, to assist both businesses and employers to get through the Coronavirus pandemic.

Let’s break it down based on whether you are a business owner (an employer) or employee.

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Another year has gone by … FBT Year Ends on 31 March – what you need to do

The 2020 FBT year ends on 31 March 2020. (Really?) Yes, that date is not an error as the Fringe benefits tax (FBT) year runs from April to March (unlike the Australian tax year which runs from July to June). It can be confusing at times.

What is FBT?

FBT is the short for Fringe Benefits Tax. It is a tax imposed on employers who provide certain fringe benefits they provide to their employees, including their employees’ family and associates.

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