Tax Tip 180: 10 Tax Myths

Discussion in 'Accounting & Tax' started by Terry_w, 27th Jul, 2018.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Another myth

    1. I pay a $10,000 expense and get $10,000 back at tax time.

    Assuming you are able to claim the expense in full you would only 'get back' the cost of the asset x your marginal tax rate, generally. It could be less if the expense makes you drop a tax rate.

    So if your marginal tax rate is 47% you would get $4,700 back on a $10,000 expense, but it would still be $5,300 out of pocket
     
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Another, you cannot claim Fee-HELP payments as you don't pay the fees upfront.

    This is not correct, if your course is entirely work related it could be claimable in full.

    Tax Tip 198: Fee-HELP and Deductibility of Course Fees Tax Tip 198: Fee-HELP and Deductibility of Course Fees
     
  3. money

    money Well-Known Member

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    I'm confused by this. Can you please explain this further? Thanks
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    HECS on top
     
  5. UrbanPlanner

    UrbanPlanner Well-Known Member

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    What about if you have an expected CGT bill of $50k in a FY (say from the sale of a property), and you had a $10k expense. Would that $10k expense simply be wiped in full from the $50k forecast tax bill? So it almost is like getting it back in full, as that $10k expense would have otherwise gone to the tax man?
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No. Same thing as above really
     
  7. SatayKing

    SatayKing Well-Known Member

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    I believe the percentage included the HELP/HECS as mentioned by @Terry_w which is preently 8% and 10% max next FYr,) the medicare levy plus the medicare levy surcharge where no private health insurance is held. Certainly adds up!
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Myth: I want to transfer half of my property to my spouse so that when we sell it we will each be tax on half

    Transferring half to a spouse will result in CGT itself.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    THis one has come up twice this week on the forum!
     
  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Tax law myths are what keep me in work. And people getting it wrong keep people at the ATO employed.
     
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  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Another myth or misconception that I have heard a few times now is that if a property is positive geared you cannot claim any more deductions - you cannot claim negative gearing.

    But it doesn't work this way.

    example

    Rent is $20,000 pa.
    Expenses including interest is $19,000
    Net profit is $1000

    but the expenses have been deducted from the rental income.
     
  12. Trainee

    Trainee Well-Known Member

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    Myth the best accountant is the one that can get me the biggest refund.
     
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  13. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yeah had that very discussion today. A refund reflects so many things. Quality of advice v cost is better measure.
     
  14. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Heard of a new one the other day.

    Say someone buys 1000 XXX shares at $1 = $1,000

    Shares jump to $2 and they sell 500 shares for $1,000

    This person thought that no CGT would be payable because she had not sold for more than she bought. Purchase cost $1000 and the sale generated $1000.


    In reality the cost base of each share double in value and this is what you use to determine the gains – it is worked out on individual shares.
     
  15. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes I see many with shares and CGT assets that pay income generally:

    1. DRPs have no costbase. I dont want to sell as I will pay tax on the whole sale
    2. My Coles shares have no costbase. as I got them for free
    3. I didnt receive any dividend income - (I participate on a DRP)
    4. My ETFs pay dividends (they dont, they pay a trust distribution) and I add up all the cash received and pay tax on that (This affects ALL Commsec users!!) WRONG - You are probably overpaying tax.
    5. My trust income and ETF income is cash based. WRONG. Trust entitlements can be paid after year end. Rely on the tax statement issued. Heaps of so called shares are NOT shares. I wish I had $1 for each time someone told me a LIC is a share. In most cases its a trust unitholding or stapled security or ETF.
    6. My trust income include tax deferred and AMIT adjustmnets. Tax free income. Yah. Wrong. These amounts likley REDUICE or alter the costbase and impact CGT calcs
    7. My foreign (US) shares arent subject to Australian tax. I get a US form that says I paid tax so I can ignore it.
    8,. I bought and sold shares. At year end I will treat this as my wife's income as she doesnt work
    9. The 45 days holding period rule emans I lose franking credits - My wrap statement says so. (Often incorrect)
    10. The 45 holding period rule means I can use the franking credits....But I didnt check the rules which limit how much
    11. I bought and sold CFDs through the year (many many times) and have a loss. Its probably NOT a CGT loss and may be a deferred non-commercial loss
    12. I had shares in XYZ Ltd and they were taken over and I got shares in ABC Ltd. They have no costbase.
    13. I had shares in Wesfarmers. They gave me shares in Coles. The coles shares have no costbase. I sold the wesframers and claimed the full cost against those and didnt make a profit
    14. My dad died. He had shares in BHP he has owned since a kid. When I sell they are a pre-cgt asset
    15. I have employee share scheme shares. They are given to me free each year and when I sell I dont have a costbase
    16. I have drp shares. They are bonus issue shares so I followed the ATO rules for bonus shares when calcualting my gain / loss
    17. I have shares in ABC Ltd. Im worried about the large gain I face. I transferred ownership so the shares are in both names. I can then split the gain. No. this ignores the disposal of half to your spouse.
    18. My shares in BBB LLtd are valueless and I want to claim the CGT loss as they company was delisted / iin administration etc. You will require a liquidators declaration to claim any CGT loss. Many failed businesses come good or revive. Check delisted.com.au for the long long list of such entities.
    19. I have valueless shares in BBB Ltd. I need to wait for a liquidators declaration. I cant claim a CGT loss. Yes you could if you trigger a CGT event !! Consider sale or trasnfer to another person ...like your wife ?
    20. I have shares / units / ETFs and get a DRP or reinvestmnet in ew units. When I sell, all my CGT gain is at a 50% discount. Incorrect. Some of the investments will not be discounted.
    21. I sold foreign property. I paid tax in that country. I can claim all that tax as a credit in Australia to avoid double taxation. (Incorrect in almost all cases)

    and many many others
     
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  16. Harry30

    Harry30 Well-Known Member

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    I often hear, why bother reducing that expense, it’s tax deductible.
     
  17. Synergy

    Synergy Well-Known Member

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    I drive from home to my main workplace, but atleast one day a week drive to another site (same company) 17km away from my normal workplace to do the same job when they need the labour. Guessing this is tax deductible but havnt been recording trips the last year
     
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  18. Mark F

    Mark F Well-Known Member

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    Keep a diary. I used to drive between CIT campuses in Canberra on an frequent but irregular basis. My Google Calendar entries for the classes I taught and location provided evidence for a lot of deductions. Just be careful to keep track of home to work, or work to home journeys that may not be deductible,
     
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  19. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    You could use Google maps for the route and then your own diary for the number of trips. Thats a reasonable basis provided you are using the cents per Km basis and own the car.
     
  20. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I hear employers say this. An employee is always better off being reimbursed for the cost. The cost and the amount received mean $0 impact financially.
    A unreimbursed deductible expense is still a 50-60% cashflow loss
    And the employer can claim the GST
     
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