Income Tax FAQ
What is a Living Away From Home Allowance?
A Living Away From Home allowance is paid by employers when they require an employee to work in an area that is different to their normal workplace and the employer pays the costs to the employee for living away from home.
For example, I work and live in Melbourne and after a few months the company requires me to go to Regional NSW for a few months to do some work there. They pay me an allowance for the costs of living in regional NSW because they have requested me to work there for a time. I do not need to declare it in a tax return. It is an allowance paid by an employer to an employee and is not subject to tax by the employee, provided it is paid in accordance with the tax office guidelines. No expenses can be claimed against this allowance.
The rules governing the tax treatment of LAFHA were to be changed on 01 October 2012 and the allowance was to cease to be a fringe benefit and become assessable income to the employee -however that legislation was never passed.
From 1 October 2012, the LAFHA continued to be taxed to the employer under the Fringe Benefits Tax system (not to the employee under the income tax system as was proposed). However, the employer is able to reduce the fringe benefits tax payable on the amount paid to the employee, for a maximum period of 12 months, provided the employee meets the following conditions:
- maintain a home in Australia for their own personal use and enjoyment at all times whilst required to live away from home for their work; and
- provide a declaration relating to living away from home.
If these rules are satisfied, the employer is able to reduce the taxable value of the LAFHA by:
- The amount of the employee's actual substantiated accommodation expenditure while living away from home; and
- The amounts incurred by the employee for food or drink costs while living away from home, less a statutory amount if applicable.
This reduction is only available for a period of 12 months (except for fly-in-fly-out and drive-in-drive-out employees).
I won $150,000 on a game show this year, is this taxable income?
If your prize was from a one-off appearance then it would not be taxable. However, if you are a professional contestant it will be taxable. If someone appears as a regular contestant on these shows then they could be considered to be a professional and the prize would be assessable income.
I have received $25,000 for an interview on a current affair show. Is this taxable?
Yes this payment is taxable. You have been paid for providing a service.
I have inherited some money. Is it taxable?
The inheritance is not taxable unless you are advised by the executor that a part is taxable. However, if you invest the income from the estate then any earnings will be taxable.
A friend told me about an investment that he was interested in and suggested that I put some money into it as well. He says we could make a large amount of money but I think it sounds too good to be true.
You are wise to be cautious. Not all schemes are genuine and often promise large tax deductions that they say will be allowed by the tax office. It is wise to check out any investment scheme before putting your money into them. If you invest in a risky tax scheme, you could lose some or all of your money, and you may have to pay back any refunds due to over-claimed deductions as well as interest and penalties.
Before investing in any tax scheme it is advisable to seek independent advice from a professional advisor and/or the tax office. Information and warnings about investment schemes and scams can be found on the Australian Securities and Investment Commission and the Australian Competition and Consumer Commission SCAMwatch website.
Can all the interest from our joint accounts be declared in my wife’s tax return because her income is much lower than mine?
No. All income must be declared by each recipient on the same basis as the accounts are held. Interest from a joint account must be split 50/50. You cannot declare it all on your wife’s tax return and doing so could lead to an ATO audit.
My bank interest is only $10. Does this amount have to be declared?
You must declare all interest from all sources no matter how small the amount is.
My 14 year old daughter has received $600 from a trust distribution. Does she have to lodge a tax return?
Since the 2012 income year, even if this is her only income, she will have to lodge a return. Prior to the 2012 income year a minor could have earned up to $3,333 from investments before any tax would be payable on that income. However, from 1 July 2011 the Government removed the ability of minors to access the low income rebate for unearned income (such as interest, dividends, rent, royalties, trust distributions etc.). This means that a minor who earns over $416 in unearned income must lodge an income tax return.
Personal exertion income (such as salary & wages) will still have tax payable on it, but that tax payable can be reduced by the low income tax offset but all unearned income will not attract the low income rebate and be taxed at minors’ rates.
I have shares and received franked dividends this year but have no other income. Do I have to lodge a tax return to get the franking credits refunded to me?
You do not have to lodge a full tax return. You can complete the Refund of Franking Credits for Individuals form which can be lodged by telephone or mailed to the ATO.
I have just received a letter from the tax office saying that I did not declare some interest from my bank account. What should I do?
If you believe this is incorrect you should contact your bank to verify the income details for your accounts. The bank should notify the ATO in writing if this information is not correct. You have 28 days to correct this information. However, if you have omitted the income, you will not need to contact the ATO. They will amend your return and send you a new assessment requesting payment of the additional tax, a general interest charge and, in some cases, penalties. If you requre assistance with your communictaion with the ATO, H&R Block can help.
Do I need to declare my overseas pension?
In most cases overseas pensions are taxable and, if you are an Australian resident, you will need to include the amount in your tax return. There are a few exceptions to this rule. Please call H&R Block on 13 23 25 if you are not sure.
Do I have to declare income from Centrelink (Newstart, Austudy) on my tax return?
All income must be declared. This is because the tax office needs to determine what tax rate applies to your other earnings for the year.
Centrelink will NOT be issuing PAYG Payment Summaries to taxpayers this year indicating how much income must be included in your tax return (taxable amount). You can access the information required from Centrelink online services, Express plus mobile apps and at self-service terminals at Dept. Human Services Service Centres. H&R Block can also look up the required information for you at your interview via the ATO Portal after 9 July 2013.
You may be entitled to an offset to ensure that no tax is payable on your benefit.
I have just moved permanently to Australia. Do I have to pay tax on the money that I have brought with me?
You will only have to pay tax on any earnings that you make from the time that you moved to Australia. If the money that you brought with you earns interest in a bank account you will have to pay tax on the interest.
I will be going to Europe for six months and intend to work while I am away. Will I have to pay tax in Australia on the money that I earn overseas?
The income will be taxable unless you have worked overseas continuously for more than 90 days and are working on a specific Australian government project or deployed overseas as a member of an Australian government agency. In these cases the income will be tax exempt.
If your overseas income is not exempt, you will need to declare the income on your Australian tax return and may be entitled to a foreign income tax offset for any foreign tax that you paid on that income.