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The tax basics you need to know as a contractor working as a caring professional are:
1. All individuals (over 18 years of age who were full year Australian tax residents) need to lodge an annual income tax return, unless they earned less than $18,200 and had no tax withheld or paid no PAYG instalments in the financial year.
2. If you’re an individual working as a ‘contractor’ or sole trader, you are considered to be operating a business and need to have an ABN, pay tax, and pay super. Read how to determine if you’re a contractor or employee.
3. Contractors earning over $75,000 their business need to have an ABN and be registered for and pay GST.
4. As a contractor no one is withholding income tax for you therefore you’ll need to account for and put aside money for tax which will be payable at year end. You’ll also need to make an allocation for the GST payable at the end of each quarter if you are registered for GST.
To help you complete your income tax return, here’s some information about the two main parts - the income and the deductions.
When you disclose your income, you should report all sources. This could include:
Health care professionals are commonly paid allowances in relation to travel,telephone expenses, uniforms and being on-call. Any of these allowances shown as a separate amount on the individual's payment summary need to be included as income in their income tax return. The respective expense paid by the individual can then generally be claimed as a deduction.
You may also receive reimbursements for work related expenses that have been paid for by you on behalf of the business. An individual cannot claim a deduction for any expenses reimbursed by an employer and do not need to include reimbursements as income in their tax return.
Individuals working in the healthcare industry might also be receiving fringe benefits. These amounts do not need to be included as income in the individual's tax return, however are used in determining whether certain surcharges apply to the individual and whether certain deductions, offsets, and other government benefits can be claimed. The employer is required to report the benefits provided to the ATO, but the reportable fringe benefits amount on the individual's payment summary should also be included as a disclosure in their income tax return.
If you have reportable employer superannuation contributions included on their payment summary, this amount needs to be included as a disclosure in their income tax return, but does not get counted as income. Again, these amounts are used to help determine surcharges and eligibility for some tax offsets, government super co-contributions and other government benefits.
To reduce your taxable income, you’re able to claim expenses that are directly related to completing your work. Here’s a list of common work related expenses in the health and caring sector:
You may be able to be claim car expenses for work related travel using the cents per km method or the logbook method, you can learn more about both methods here. Travel between home and work, and travel to social functions cannot be claimed.
A deduction cannot be claimed for car expenses where an employer or other person provides a car and the individual does not pay for any of the running costs.
In your role, it’s likely you’re required to wear occupation-specific or protective clothing which you might be able to claim a deduction for the cost of buying, hiring, repairing and cleaning. While it is not possible to claim a deduction for conventional clothing including stockings and everyday footwear, it may be possible to claim the cost of some of these items if they form part of a compulsory uniform which, when worn together, identifies you as an employee of the organisation and the policy is enforced by the organisation. Protective clothing which can be claimed must be clothing that helps protect from the risk of illness or injury posed by your income-earning activities.
It is generally possible to claim a deduction for the cost of laundering and dry cleaning work clothes which are deductible as occupation-specific, compulsory, or protective items (as outlined above). If the claim is greater than $150 and the total claim for work related expenses (other than car, meal allowance, award transport allowance and travel allowance expenses) is greater than $300 the individual needs written evidence for the total claim. Written evidence is not required if the total claim for work-related expenses is $300 or less.
It’s very common to undertake study while working in the healthcare field for which it may be possible to claim a deduction. To claim a deduction for self education expenses you will need to show sufficient connection between your current employment and the study undertaken, showing that it maintains or improves specific skills or knowledge required to do your current role or that the education would result in, or is likely to result in, an increase in your income from that job. You are not eligible to claim self-education expenses if, they you are not earning income relevant to the type of study being undertaken, or are only working casually to support yourself whilst studying. If you are eligible to claim self-education expenses, there are a number of specific expenses which can be claimed, including but not limited to, course fees, textbooks, stationery, home office expenses, some travel expenses, and depreciation on a computer. It is not possible to claim repayments made on loans with the Student Financial Supplement Scheme (SFSS) or Higher Education Loan Program (HELP).
Commissions and fees paid to a job placement agency can be claimed as a deduction if you’ve paid for these fees yourself, however a deduction cannot be claimed for upfront fees, joining fees or search fees.
If you’re required to hold a practising certificate, you can claim a deduction for the cost of renewing this annually.
A deduction can be claimed for the decline in value of equipment used for work, including but not limited to, calculators and electronic organisers, computers and software, answering machines, telephones, mobile phones, professional library, dedicated stopwatches and fob watches. If the item costs less than $300 an immediate deduction can be claimed for the work-related portion of the cost. Items cost in more than $300 need to be depreciated over their useful life.
The cost of first aid training courses can be claimed as a deduction if you’re the designated first aid person and are required to undertake first aid training to assist in emergency work situations.
Generally, the cost of meals are not considered deductible, however overtime meal expenses may be if you received an overtime meal allowance which was paid under an industrial law, award or agreement. The deduction can only be claimed if an expense was incurred for overtime meals on an occasion when you worked overtime and received an overtime meal allowance for that overtime.
If you’re attending seminars, conferences or training courses that are sufficiently connected with their work activities, you can generally claim the cost of these.
A deduction can generally be claimed for the costs of logbooks, diaries, pens and other stationary used for work.
A deduction can generally be claimed for the cost of journals, periodicals and magazines that have content specifically related employment as a nurse.
A deduction can generally be claimed for the cost of work-related phone calls and phone rental. It is not however possible to claim a deduction for the cost of connecting a phone, pager or any other communications equipment or to claim the portion of communication expenses which relate to the personal use of the item.
Deductions are generally allowed for fees paid to unions and professional associations with the exception of joining fees, or levies or other amounts paid to assist families of employees suffering financial difficulties as a result of employees being on strike of having been laid off.
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