+ What substantiation do I need to keep and for how long?
In order to claim a tax deduction for an expense incurred, there are 2 conditions that must be met:
- Nexus to employment
Nexus to employment (or assessable income) can broadly be described as an expense that was necessarily incurred in order to derive assessable income. In other words, if you hadn't incurred that expense, you would not have been able to earn the relevant income.
Sally is a bar tender in a pub in Sydney. She has been working there for 6 months when her manager tells her that he wants her to start working in the gaming room, which will allow her to get more shifts at work at a higher wage rate, as well as higher tips from patrons. Working in the gaming room requires Sally to hold a Responsible Conduct of Gambling certificate. She agrees to work in the gaming room once she has acquired the certificate, which she has to pay for. The cost of the certificate is tax deductible against her employment income.
Greg is a full time student at University. He received a large inheritance from a distant relative and the funds from that inheritance are kept in a high interest earning bank account. The interest he earns is assessable income. The bank fees that he pays from his account where the funds are kept are tax deductible against his interest income.
Lois lives in Sydney and owns an investment property in Brisbane. She manages the property herself and travels to Brisbane twice a year to inspect the property to ensure that it is kept in a good condition by her tenants. Each time she travels, she goes directly to the property, then to her hotel for 1 night and returns to Sydney the next morning. The cost of travel to Brisbane including flights, accommodation and meals are tax deductible against her rental income.
Substantiation is required in order to claim the deduction. Once the nexus has been determined, it is a requirement that there is some evidence that the expense was incurred. The easiest way to substantiate a deduction is to keep a receipt of the expense. You do not have to keep the original receipt. The best way to keep records of your expenses is to take a photo or scan the receipt, and keep a soft copy of it somewhere safe, like a hard drive or online. This method is preferable to keeping hard copies of receipts, because even when stored well, receipts will fade, which will render them completely useless.
Some suggestions on how to keep records:
- Take a photo of the receipt with your smart phone and email the image to yourself. Use a descriptive subject line such as "Receipt - petrol August"
- Collect your receipts in an envelope, zip lock bag or box, and categorise them once a month, scan them in batches and email to yourself or save onto an online/offline directory with a descriptive file name, e.g. "Receipts - March - Car expenses"
- Use a document scanning app such as Sage Point & Claim which will convert the data within the image into information such as value of the expense, ABN of the seller, date and category.
Once you have a year's worth of receipts, you will need to add them all up. Please do not send us your receipts unless you are being audited. It is up to our clients to collate receipts and report them to us accurately.
You will also need to keep logbooks and diaries where necessary (e.g. for a car, frequent travel, mobile and internet use etc, in order to work out your work-related use of certain items). For more information about this, please contact us.
If you need advice about whether an item is deductible or not, you can ask about it during the preparation of your tax return.
+ Why have I received a letter from the ATO about undeclared interest?
As part of their routine operations the ATO uses a data matching mechanism to confirm claims made in tax returns. To assist in this data matching process, the ATO receives information from Centrelink, Banks, Employers and other institutions and compares the information provided with claims made in tax returns.
According to the ATO database, in the financial year for which the letter refers, you have received interest income from various financial institutions which you did not declare when you provided us with information to prepare your tax return.
The most common reason for this is that at the time of preparing your tax return, the ATO did not have the information from your financial institution about your interest income, and you did not provide the bank statements or information about your interest income to us. Therefore, income was under reported.
It is possible that the information in the letter from ATO is incorrect, and if it is incorrect, you must contact ATO to dispute this information.
If the information they have is correct, then you do not need to do anything - they will issue you with an amended assessment and you might have to pay some tax back - this is the tax refund that you have already received but were not entitled to.
+ What is an ASIC Annual Statement?
As from 1st January 2003, the Annual Report to ASIC replaced what was previously called the "annual returns". Previously, all companies had to report no later than 31st January for the year ended 30th June (7 months before) about company addresses (registered office & principal place of business), company officers details (director & secretary; names, date of birth & address) and members details (share holders - addresses and amount of shares held). The report was accompanied by the prescribed fee (which, in 2002, was $200).
The new system removed the unity of the reporting date and was replaced by reporting on the anniversary date of the company (the anniversary date is the date of incorporation of the company eg. if the company was incorporated on 5th February, then every 5th February the company has to file the annual statement).
ASIC will send every company a statement based on the data available with ASIC at the date of the printout, together with an invoice. The company officers will then confirm that all details shown are accurate, sign the form & return to ASIC together with the fees as required in the invoice.
It will be almost impossible for our firm to monitor these reports, since there are several hundred companies in our client data base, and they all have different dates of incorporation. However, each day, we download the returns directly from ASIC, if any are applicable. Once we see a report is due, we will send this out to the client so that they can check their details and make the payment.
The annual fee MUST be paid on time. Late payments will incur penalties. Not having received the invoice is not an acceptable excuse to ASIC. Therefore, please search the ASIC company database to see when your next review date is. This date will give you an indication of your annual fee due date (the due date to pay will be 2 months from the review date).
Together with the Annual Statement and the annual fee invoice, we will also send our clients a Solvency Resolution template. This document should be completed and kept with the company's corporate register file.
+ Why can't I get an earlier appointment?
Our individual client base is one of the largest in Australia, and currently the only accountants in our firm who meet with clients for tax returns and consultations are Joel Bentley, Samuel Bentley and Dorin Bentley.
Unfortunately, this creates a huge inconvenience to many of our clients who want their tax returns done as soon as possible, and we understand this need completely. The best way to get an early appointment (i.e. an appointment close to the start of the new financial year, usually around July, August and September), is to book your appointment one year in advance.
If you want to be on a waiting list, inform our receptionists when you make your appointment.
Alternatively, you can email your documents through to us and we can prepare it by correspondence, usually by an earlier date than you would get an appointment.
+ Why haven't I received my Notice of Assessment?
There could be several reasons for why you haven't received your Notice of Assessment (NOA):
The ATO hasn't sent it yet - The ATO has up to 28 days after a tax return is lodged, to issue a NOA. Before this time, if we haven't received your NOA (and consequently, sent it out to you), then we can't ask the ATO about it, because legally, they are not yet late with issuing it;
It was sent to the wrong address - If you have moved in the past 12 months and haven't informed us, then this might be a reason why it would be sent to the wrong address. Even if you believe you have informed us of the change in your address, it is still a good idea to confirm your contact details with us, if you have moved in the last 12 months, or moved since the last time we corresponded with you. If it was sent to the wrong address, please see #3;
It was lost in the mail - If this is the case, and sometimes it is, but very rarely, then we have to send you a copy of your NOA (we keep a copy of all NOA's for our records). If the NOA was for a refund, then we will have to contact the ATO and ask them to issue a new NOA, since you can't bank a photocopied cheque (the refund cheque attached to the NOA).
Your tax return hasn't been lodged - This rarely happens, but sometimes we lodge a tax return, and the transmission wasn't received by the ATO. In this case, we would have to re-lodge your tax return.
If you are waiting for your NOA, and it has not yet been 28 days, you shouldn't be concerned, but after 28 days from the date of lodgement (usually, the date of your appointment), you can call our office so that we can investigate the matter.
Please note, NOAs are now available online through the tax agent portal in PDF format, and we can email a copy of this to you on request.
+ What do I need to bring to an appointment?
If you are an individual tax payer and you are a:
New Client - you must bring a copy of your previous year's tax return, information about your income (including interest, dividends etc) for the relevant financial year(s), you must bring your group certificate(s). You can also bring information about your expenses during the year, bank statements, HECS debt information if applicable, private health insurance details, and any other financial information that you think is relevant. Do not bring a box of receipts, as it is unlikey that Joel will have time to go through them. Instead, prepare a summary of the receipts (if applicable) and bring them with you to the appointment. If you have an investment property(s), regardless of whether it is new, or from previous financial years, you must bring details of purchase of the property, and the income and expenses for the property. Also bring any Hire Purchase contracts for motor vehicles if applicable.
Existing Client - you must bring information about your income (including interest, dividends etc) for the relevant financial year(s), you must bring your group certificate(s). You can also bring information about your expenses during the year, bank statements, HECS debt information if applicable, private health insurance details, and any other financial information that you think is relevant. It is important to bring material which relates to significant changes since the previous year, such as a purchase of a new investment property, a new car, etc. If you have an existing investment property(s), i.e. from the previous financial year, you must bring details of the income and expenses for the property. If it is a new investment property, you must also bring the purchase contract, and any other documents relevant to that property. If you are an existing client, but you went to a different tax agent in the previous year for whatever reason, you will also have to bring your previous year's tax return, since we will not have a copy of it on file.
If you are a sole trader or partnership tax payer and you are a:
- New Client - you must bring a copy of your previous year's tax return, as well as group certificates from any employers if applicable (if you are a partnership, you will have to bring the tax return of the partnership as well as the individual partners from the previous year). The items necessary for a NEW INDIVIDUAL tax payer will apply (see above). As well as that, you will have to bring spreadsheets of the income and expenses of your business throughout the year, any BAS working papers that were lodged for the business throughout the year if applicable, copies of contracts for business loans, purchases etc, if applicable, bank statements, group certificates for any employees your business may have, information regarding how much superannuation you paid and when, if applicable, and any other financial documents you feel you may need to bring. Not all of these items will be relevant to you, but it is always good to bring as much as you can, just in case we need more information.
- Existing Client - you will have to bring the same documents or information as what you had brought the previous year when you came for an appointment (including the items necessary for an EXISTING individual tax payer - see above), as well as any new documents or information that relates to new purchases, loans, sale of assets, etc during the financial year. If you are an existing client, but you went to a different tax agent in the previous year for whatever reason, you will also have to bring your previous year's tax return, since we will not have a copy of it on file.
If you are an associate of a company/family trust tax payer and you are a:
- New Client - If you have an existing company or family trust, Joel will require the previous year's tax return and financial statements. Where applicable, he will also require copies of contracts for loans, purchases of properties or assets, bank statements, wages information and employee group certificates, BAS working papers for the relevant financial year, a spreadsheet or MYOB (or equivalent) file with profit & loss and balance sheet items, your personal tax returns, and any information regarding your income and expenses not related to the company. The documents required for a NEW INDIVIDUAL tax payer may apply, including private health insurance and HECS information, etc.
- Existing Client - If you have an existing company or family trust, where applicable, Joel will require copies of any new contracts for loans, purchases of properties or assets, purchased in the relevant financial year, bank statements, wages information and employee group certificates, BAS working papers for the relevant financial year, a spreadsheet or MYOB (or equivalent) file with profit & loss and balance sheet items, and any information regarding your income and expenses not related to the company. Please note - for a company or family trust, the tax return is not prepared on the spot. This sort of job usually takes several weeks to complete, and even urgent returns cannot be completed on the same day. Therefore, if you do come for an appointment, be prepared to only have approximately 15 minutes allocated, for a discussion with Joel regarding the documents you are providing, and the business activities in your entity during the relevant financial year. Taxation or Accounting consultations will not be given during the appointment, as this requires more time, and clients are charged for this time by the 1/2 hour. For a consultation, you must contact our office to make an appointment and find out what documents, if any, you must bring with you.
Most importantly, you will have to bring your cheque book, or cash, to pay for Joel's services to you, on the day of your appointment. Since company returns are not completed on the appointment day (if there IS an appointment, since in most cases, the entire tax return is completed via correspondence), you will not be required to pay on the day of the appointment, but prompt payment of the invoice is expected when returning signed financial documents that Joel has prepared for your company/trust/superannuation fund. Payment can be made by cheque or electronic funds transfer. Please note: WE DO NOT ACCEPT CREDIT CARDS OR EFTPOS PAYMENTS.
If you forget to bring something, or Joel discovers that there is certain information that he needs before he can complete your tax return, then you don't have to worry - You can always send us the additional information in the mail, or drop it off at one of our offices at your earliest convenience, and Joel will complete your tax return as soon as he can and send the material to you for you to sign.
+ What Materials do I need to provide for a Company Return?
For a company tax return, please provide the following materials:
Bank statements - Either originals, or copies, faxed, emailed or posted to us, from 1st July to 30th June of the relevant financial year. Of particular importance to us, is the closing balance of (all) bank accounts for the company, and details of any interest earned (and tax withheld if applicable).
Expenses & Income - You need to provide details of all your income and expenses; this can be in excel format, in a cash book (ledger etc), or some sort of business software such as MYOB, Quickbooks, Erecord etc. We are able to read most formats, but if we do not have the supporting software, you will be required to print the records and post/email/fax them to us.
Supporting documents - You might want to provide us with bank cheque books, credit card statements, invoices / bills and receipts. All of these are fine, but please note, we will not process receipts under any circumstances. If you cannot provide a summary of your receipts, you will need to engage a book keeper to do this. It is far too time consuming for us to do this sort of work, and will be extremely costly to you, to have professional accountants carrying out bookkeeping tasks.
Contracts - If you purchased any major assets throughout the financial year, we will need the contracts for purchase, and any finance agreements (e.g. a purchase contract for a car, and the finance contract that goes with it). If you purchased a property in the name of the company, you will need to provide a settlement sheet, as well as any other related documents. If you purchased smaller assets, such as office equipment or furniture, you can provide these details as well, including receipts of the purchase if applicable.
Wages - If the company has any employees (excluding yourself, your spouse, or any other related person), you need to provide copies of payment summaries for these employees, including a copy of the PAYG payment summary statement if it was already sent to the ATO. Otherwise, if you want us to prepare the payment summaries for the company, you need to provide us with a complete wages reconcilliation, and details of all employees (including TFN, full name and home address, gross salary, tax withheld and any allowances paid).
If you also require us to prepare Associate personal tax return (for you and your family) together with the company return, you will need to provide:
Payment summaries - all payment summaries for the relevant year, for all members of the family who wish to have their return prepared (this excludes payment summaries from your company, if we are preparing them for you)
Private health Insurance - if you have private hospital cover, you must provide details of this (an annual statement from the insurance provider will be ideal). The cover must be for all dependants, not just you but also your spouse, and children if applicable. It is not enough to have ancillary cover, you MUST have an appropriate level of private hospital cover.
Dividends & Interest - you need to provide details of all interest and dividends received if applicable.
- Tax agent fees - provide an invoice from last year, for all members of the family, unless the service was provided by Joel Bentley.
Expenses - information about any medical (after refunds) or work-related expenses, e.g. donations, internet, subscriptions, tools, etc - whatever you feel may be applicable.
Rental Property - provide all rental property income and expenses details
Capital Gains - if you sold a property, or other asset, you will need to provide us with additional information - please contact us for more information in this regard (it will be different for each person depending on when the property was purchased, and whether we prepared the previous years' rental property schedules).
The processing of these returns may take up to several months (but usually will take around 4 weeks if we have all the materials available), depending on the time of year, the number of returns and the complexity of your company's business activity. Please let us know if you require the return for urgent matters (e.g. as supporting documentation for a loan application). The fees for the service will be payable upon completion of the financials and returns, and must be sent by cheque or paid by direct debit, as soon as possible. The returns will not be lodged until the payment has been received.
+ How do I De-register my company?
If you are sure that you want to de-register your company, the first thing to do is inform us of this decision. As tax agents of your business, we need to know of your intentions so that we can tell you about any outstanding tax liabilities etc that you need to attend to first.
A company with liabilities cannot be deregistered. As a director, you need to make sure, that all debts have been cleared, and that assets have been disolved. ASIC allows a company to hold no more than $1000 worth of assets when it is being de-registered.
Next, you have to sign an ASIC document called Form 6010 "voluntary deregistration of a company". We can provide you with this form. You will need to post the signed copy (signature must be of a director of the company), together with a cheque payable to "ASIC" (fee may vary from year to year).
We will forward the form and cheque to ASIC on your behalf and make a note in our database that your company is being deregistered.