Tax advice for Members 1998/99 Income Year
July 1, 1999
The following advice was prepared for the benefit of FBEU members with the assistance of the Union’s accountants, AJ Williams & Co.
OCCUPATIONAL TAX DEDUCTIONS FOR THE FIRE FIGHTING INDUSTRY
FOR THE 1998/99 INCOME YEAR
Work related deductions are expenses which you have incurred in the course of performing the duties of your job. There are some basic rules which need to be considered when deciding whether or not you are entitled to make a claim.
- You must have incurred the expense (and it was not reimbursed by your employer).
- You must have incurred the expense in earning or producing your assessable income and it should not be an expense of a private, domestic or capital nature.
- You must be able to substantiate or prove your claims for deductions.
The common work related expenses incurred by fire fighters, and the extent to which they are allowable deductions, are discussed below. This guide looks at the extent to which you may claim a deduction and the record keeping required to prove your claim.
TRAVEL ALLOWANCES PROVIDED UNDER THE RELIEVING PROVISIONS
At this point in time, you are entitled under your award to a flat payment of $18.00 for each shift worked. This payment is subject to Pay-As-You-Earn (PAYE) deductions.
The $18.00 base rate relieving allowance will appear on your group certificate as either;
- Special Item, code ‘ASOS’ (after start of shift) where the allowance was attracted for a shift involving a move after the start of the shift. This amount will have been subject to PAYE deductions.
- The allowance will be included with the rest of your assessable income on your group certificate where it was attracted for a shift not involving a move after the start of the shift. This amount will have been subject to PAYE deductions.
An employee who is detailed to relieve at a station outside the nominal five kilometre distance shall be paid at a rate of sixty eight cents per kilometre for the distance actually travelled on both the forward and return journey. Any such payment will be in addition to the base rate.
All relieving kilometers, will appear on group certificates as a Special Item, code ‘KLM’. This amount will have been subject to PAYE deductions.
TRAVEL ALLOWANCES – OTHER
Permanent Fire Fighters also receive the Specified Journey Rate/Official Business Rate (dependent on circumstances and engine capacity) per kilometre where they use their private vehicles to attend certain training courses.
Specified Journey Rate/Official Business Rate kilometre allowances will appear on your group certificate as a Special Item, code ‘PS KLM’ (public service kilometers). This amount will have been subject to PAYE deductions.
The receipt of these allowances do not automatically entitle you to a deduction. The allowances are fully assessable and are included in your group certificate. The tax treatment of each type of payment is discussed below:
Base rate of $18.00
No apportionment applies to the base rate of $18.00. Deductions can be made against this taxable income in certain circumstances. They are:
- the cost of travel for movements after start of shift (no prior notice). That is: from a fire fighters normal workplace (or base station) to another workplace (or relieving station), whilst still on duty and back to the normal workplace (or base station) or directly home.
A deduction is not available for the cost of travel between home and a normal work place as it is generally considered to be a private expense.
To claim this deduction you need to keep certain records. There are four different methods available, each with different amounts of records that need to be retained. They are:
- The cents-per-kilometre method – the deduction is based on a fixed rate per kilometre travelled for business purposes (up to a maximum of 5000 km), depending on the engine capacity of your car. The rates at which you may claim tax deductions for car expenses for the 1998-99 year are:
rotary engine capacity
fixed rate per
0 – 1600 cc
0 – 800 cc
1601 – 2600 cc
2601 + cc
1301 + cc
- The 12% of original value method – the deduction is based on 12% of the original cost of the car and can only be used if more than 5000 business kilometres are travelled during the year;
- The one-third of actual expenses – deduction based on actual expenses incurred during the year and can only be used if more than 5000 business kilometres are travelled during the year; and
- The log book method – requires that a log book be kept for a continuous period of 12 weeks and a record of all expenses and odometer readings must be retained.
If you claim less than 5000 business kilometres in a year it is recommended that you use the “cents-per-kilometre” method as it involves the least record keeping. The taxpayer must record the distance travelled between two work locations, the number of trips made during the year and the car’s engine capacity.
This method cannot be used for motor cycles or when the taxpayer claims more than 5,000 kilometres per year as business related travel. If the taxpayer travels more than 5,000 business kilometres, you can use this method if you only claim 5,000 kilometres travelled for business purposes.
If you wish to claim more than 5,000 business kilometres, you will need to use another
method which usually requires more record keeping.
The cents per kilometre rates
The cents per kilometre rates are included in your group certificate. You can claim a deduction for expenses incurred in business travel if you meet the record keeping requirements described above.
A deduction is generally not allowable for the cost of transport between home and the
work place (base station or a relief location). However, a deduction is allowable for the cost of travelling between home and work if an employee’s work is itinerant. ‘Shifting places of work’ is another term for itinerant.
It is unlikely that any relieving firefighters would be classified as permanent itinerant employees by the ATO. However, there may be circumstances where itinerant classification may be a temporary feature of an individual employee’s duties. This would depend upon factors such as the frequency and variety of alternate locations, the amount and nature of notice, and the configuration of the roster and relief locations.
Advice from you accountant or the ATO should be sought if you feel that you may be in a position to claim deductions for travel between home to work on the basis of being an itinerant employee.
The tax treatment of travel allowances changed from Wednesday 1 July 1998 with the implimentation of tax ruling TR 98-10. Essentially the tax ruling establishes rules in relation to the tax deductibility of travel allowances and requirements for substantiating a claim with the ATO.
Prior to the implementation of this tax ruling on 1 July 1998, travel allowances had not been subject to the deduction of PAYE tax instalments and have not appeared on members group certificates. The tax ruling TR 98-10 changes this because it sets down what the ATO consider to be ‘reasonable amounts’ for expenses incurred in travelling involving sleep away from home.
Where the award travel allowance exceeds the ATO’s ‘reasonable amount’;
- the difference between the two amounts will be subject to the deduction of PAYE tax instalments at a firefighters marginal tax rate, and
- the full amount of the allowance is required to be shown as assessable income on a firefighters group certificate
- the requirements outlined in 1 & 2 above should be dispensed with where members receive additional compensation pursuant to sub-clause 26.6.5 of the award which provides for reimbursement of expenses in addition to the amount of the allowance;
22.214.171.124 Where the meal allowance or the accommodation allowance is insufficient to adequately reimburse the employee for expenses properly and reasonably incurred, a further amount may be paid so as to reimburse the employee for the additional expenses incurred subject to the following:
126.96.36.199.1 The Commissioner may require the production of receipts or other proof that expenditure was incurred.
The table below sets out the ATO’s reasonable amounts in relation to the allowance payable to firefighters under the award. Where the award allowance exceeds the ATO’s ‘reasonable amounts’ the difference appears in bold print. Where the award allowance is less than the ATO’s ‘reasonable amount’ the difference appears as a negative in brackets < – $ >.
|ATO reasonable amount||Award travel allowance||
|High cost country centres|
|Newcastle||$159.20||$122.45||< – $36.75 >|
|Wollongong||$135.70||$122.45||< – $13.25 >|
|Tier 2 country centres|
|Other country centres||$107.95||$122.45||$14.50|
|Sydney||$180.20||$171.85||< – $8.35 >|
The practical effect of the implementation of the tax ruling is that firefighters who want to claim a tax deduction for travel allowances in their tax returns, without keeping written evidence, will have to limit their claim to the ATO’s ‘reasonable amount’. To claims a tax deduction above the reasonable amount, firefighters will need to have written evidence to support the whole of their claim, not just the excess over the reasonable amount.
In cases where the award travel allowance is less than the ATO’s ‘reasonable amount’ ie; Sydney, Newcastle and Wollongong;
- no PAYE tax instalments are required to be deducted from the travel allowance, and
- there is no requirement for the allowance to appear on firefighters group certificate
USE OF PRIVATE VEHICLES – RETAINED FIREFIGHTERS
Retained firefighters receive sixty eight cents per kilometere traveled for authorised NSWFB purposes. This allowance appears on your group certificate as a Special Item, code ‘RKLM’ (retained kilometers). This amount will not have been subject to PAYE deductions.
Listed below are four instances for which Retained Firefighters are / may be required to utilise their private vehicles, and the taxation consequences thereof:
Situation No. 1
Firefighters drive their private vehicles to the Fire Station from their residence in response to the activation of their house bells and/or pager – NO DEDUCTION.
Situation No. 2
Firefighters drive their private vehicles to the Fire Station from their normal place of work in response to the activation of their house pagers – DEDUCTION.
Situation No. 3
Firefighters are required to drive their private vehicles from the Fire Station to the scene of a fire due to lack of space on the station’s fire appliance – DEDUCTION.
Situation No. 4
Firefighters are required to drive their private vehicles to a place other than their Fire Station in order to attend training or conference – DEDUCTION.
Situation No. 5
Firefighters required to drive their private vehicles to a location other than the Fire Station to peform a motor movement – DEDUCTION.
BANK ACCOUNT FEES
A deduction is allowable as a work related expense for Financial Institutions Duty (FID) that relates to the direct depositing of salary and wages in to a fire fighter’s bank account. A deduction is not allowable for any other bank fees, establishment or operating expenses.
SUPPLY AND LAUNDRY OF BED LINEN
The cost of supplying or laundering bed linen used on night shift is not an allowable deduction. It is considered to be of a private nature.
LAUNDERING/DRY CLEANING OF UNIFORM SHIRTS
A deduction is allowable for the cost of cleaning and maintaining uniform shirts. The maintenance of ordinary clothing used in the work place is personal in nature and no deduction is allowed for laundry expenses on this type of clothing.
Where the total amount of laundry expenses for the year is $150 or less, there is no need to retain written evidence of each laundry expense. Also, if the total amount of expenses is $300 or less there is no need to keep written evidence of laundry expenses.
In order to calculate your laundry expenses you may either use the ATO’s estimate or calculate your own laundry expenses by keeping written evidence (such as a receipt from the supplier of the goods or your own records for small expenses). The ATO will allow a claim of $1.00 per load where work related clothing is being laundered, and 50 cents per load where both work related and private clothing is being laundered at the same time. If the ATO’s estimate is used you should keep details of the number of washes that were done during the year, and what type of clothing (work related or private) were included in each wash.
However, it must be remembered that if the total amount of work expenses is greater than $300, in order to obtain a deduction you must keep written evidence of all your laundry expenses.
Any claims for dry-cleaning must be supported by receipts. The receipt must detail the name of the supplier, the amount of the expense, the nature of the goods and services, the day the expense was incurred and the day the receipt was made out. If the receipt does not contain this information you may add any missing details.
HAIR CUTS, HAIR RESTRAINT ACCESSORIES AND RAZORS
A deduction is not allowable for hairdressing and grooming expenses as they are considered to be private in nature.
A deduction is allowable for self education expenses if the education is directly relevant to your current employment as a fire fighter. A deduction is allowable if the education is likely to lead to an increase in your income from your current employment. This increase in income does not need to be immediate.
Self education includes courses undertaken at an educational institution (whether leading to a formal qualification or not), attendance at work related conferences or seminars and study tours.
Self education expenses include fees, travel expenses, transport costs, books and equipment. Where a course is undertaken at a school, college or university in order to gain a qualification, only the expenses in excess of $250 may be claimed. In order to determine the $250 reduction, it is not necessary that the self education expenses be deductible provided they are necessarily incurred in connection with a prescribed course of education. This will indude courses at TAFE colleges as pre-requisites for promotion within the brigade, and a course at the Institute of Fire Engineers for any university course.
You cannot claim a HECS debt as part of a self education expense. You can also not claim self education expenses where the expenses have been reimbursed by your employer. You can claim self education expenses whether you pass or fail the course.
A deduction is allowable for transport costs in connection with a course of education in the following situations:
- The cost of travel between home and the place of education and then back home;
- The cost of travel between work and the place of education and then back to work;
- The first leg of the trip if a taxpayer travels from home to the place of education and then to work;
- The first leg of the trip if a taxpayer travels from work to the place of education and then home.
You will need to substantiate any expenses to prove your claim. This will require all receipts to be retained and the same record keeping rules outlined for car expenses.
If you receive employer assistance through the reimbursement of fees, the employer will be subject to fringe benefits tax on the amount of the reimbursement.
OCCUPATIONAL FITNESS AND FITNESS CLOTHING
A deduction is not allowable for the costs of keeping fit. This is true even where the fire fighter’s regulations require a fire fighter to remain in a physically fit condition. This is because the ATO has ruled that any strenuous physical activity undertaken by an officer is not an “essential” and “regular” element of their duties.
Cost of calls
A deduction is allowable for the cost of telephone calls made by a fire fighter in the course of carrying out his or her duties. Work related calls may be identified from the itemised telephone account. If such an account is not provided, a reasonable estimate of call costs, based on diary entries of all calls made over a period of one month, together with relevant telephone accounts, will be acceptable for substantiation purposes.
Fire fighters, who are either “on call” or are required to contact their employer on a regular basis are entitled to a deduction for some portion of the cost of telephone rental. If the telephone is not used 100% for work related purposes then only a proportionate deduction will be allowable, the proportion can be calculated using the following
Business calls (incoming and outgoing)
total calls (incoming and outgoing)
Installation or connection costs
No deduction is allowable for the cost of installing or connecting a telephone.
A deduction is allowable for the cost of your annual union dues, the full amount of which should appear on your Group Certificate in the designated box, coded ‘FB FIRE BRIGADE EMPLOYEES U’.
A deduction is not allowable for expenses incurred when a fire fighter transfers from one district to another (whether voluntarily or compulsorily) as they are private expenses. In some circumstances, fire fighters are paid an allowance as compensation for disturbance, removal or storage expenses. This allowance is assessable in full and no deduction is allowable.
However, if the Department directly pays for actual relocation expenses or reimburses the firefighter for thoses expenses, the payments are generally not assessable to the firefighter. For a payment to be a non-assessable reimbursement there needs to be an arrangement where the firefighter vouches for the expenditure by providing the Department with receipts or similar documents.
SUPERANNUATION – EMPLOYEE CONTRIBUTIONS
Employee contributions to a superannuation fund are not an allowable deduction. People who are self-employed and whose income from fire fighting is less than 10% of their total income may be able to claim some deduction.
TAX AGENTS FEES
A taxpayer can claim a deduction for expenditure incurred in connection with the management or administration of his or her income tax affairs. The deduction is allowable in the income year which the expenditure is incurred. A deduction is allowable for costs incurred in connection with:
- having an income tax return prepared;
- lodging of income tax return electronically;
- objecting or appealing against an amended assessment; and
- receiving advice on a tax matter.
You must keep receipts for the amounts to be deductible.