Grey Nomad Tax Advisers
West Beach Taxation
Email Eric today for more information - firstname.lastname@example.org
Eric Taylor, B.Com (Adel), FIPA, CTA is the principal of Grey Nomad Tax Advisers, West Beach Taxation & Australian SMSF Audits.
Registered Tax Agent and Registered SMSF Auditor.
ABN 76 114 458 058 - Tax Agent reg. 67299 - SMSF Auditor 100006899 - © 2017
Liability limited by a scheme approved under Professional Standards Legislation.
Income tax in Australia is complex. The following are a few points that you may wish to consider as you travel Australia living that dream.
Are you still in the Zone?
You may be aware of the tax concession known as the Zone rebate, which has been available for many years. There are 3 different zones within Australia, known as Zones A, B and Special zones that provides a tax reduction to qualifying taxpayers. Previously you had to be within the prescribed zones for at least 183 days during the year, or even spread over 2 years.
Beware, because the rules have changed from the 2016 financial year. Now your usual place of residence must be within the zone. While this will reduce the eligibility for many, such as fly-in, fly out workers, it may still be a consideration where your usual place of residence is your RV.
The Australian Tax Office website has an Excel spreadsheet to help find out if you are in a zone. Search that website for ‘Australian Zone List’ and download.
Can you claim the cost of travel as a tax deduction?
This is the question many people ask when earning income while they travel around Australia. To claim travel expenses, the use of the motor vehicle must have a direct connection to your income. There are a number of situations where this can apply:
Travelling to work from your normal place of residence, or travel to look for work, is generally not deductible. If you travel between places of work that travel may be deductible, but not always.
What about itinerant workers? Travel may be deductible. While there are no set guidelines, the frequency of travel is an important element. Who is an itinerant worker? Someone living away from their normal place of residence because of work. In addition, you need to have that next job arranged before moving from the last one. You cannot move, then find work. Staying longer in one place may reduce the likelihood that you will qualify. If you do not have a permanent base, you are not an itinerant worker. One option may be to permanently rent somewhere, say a room at your children’s home and return to that home base from time to time. While the regularity of when you need to return is not specified, it would need to be on a regular basis. The home base would be where you are registered for the electoral role and things like your motor vehicle registrations and driver’s licences. You are NOT an itinerant worker if your RV is your normal place of residence.
If you have commenced work and need to use your vehicle to travel to obtain supplies or to undertake your work, such as travelling around a property, that that travel is deductible.
Many grey nomads earn money while they travel by selling their goods and services, either at local markets or even within caravan parks. This can range from arts and crafts to providing handyman services and even maintenance on fellow travellers’ RVs. While the cost of moving yourself may not be deductible in such situation, the cost of transporting bulky goods, such as the items that you sell or the tools that you use may be.
To be eligible to claim a deduction, the income earned must be declared. You cannot treat the income as a hobby and claim a deduction for the expenses.
While travelling away from a permanent place of residence, accommodation and even some meal costs may be deductible.
Is that a car you’re driving?
The next requirement is to know whether you are driving a ‘motor vehicle’ or a ‘car’. It may sound silly, but they are not the same in the world of taxation. A car is a specific sub-class of motor vehicle with a load capacity of less than 1 tonne and able to carry fewer than 9 passengers. This means that most motorhomes and some 4x4 tow-tugs are not cars. While cars have the benefit of using statutory methods for claiming expenses, other motor vehicles cannot do so. All costs must be able to be substantiated. This means maintaining all receipts and keeping a travel diary and log book continually, not just 12 weeks like you can for cars. Costs need to be apportioned based on the work related proportion.
When travelling with a spouse, any travel costs need to be apportioned. This will mean that you can only claim your share of the travel costs. While on face value, this suggests that you can only claim 50% of the cost. Life is not that simple. If a couple is travelling and only one member is earning the income, the amount claimed may be the portion that the individual would have incurred had they been travelling alone. In the case of motor vehicle costs, it costs no more to transport 2 people than one, so the full motor vehicle costs may be claimable, subject to being work related. With regard to accommodation, it is often the same cost for one person as for two, so the same would apply, however, you should find out the cost for a single person if applicable.
The world of claiming travel expenses is quite complex. If you believe you may be able to claim a deduction, you should seek professional advice from your tax adviser. If you feel you could claim a deduction, but have not retained the necessary records, now is the time to start so that you do not miss out in future years.
What about protective clothing?
Generally clothing worn for work is not deductible, but there are a few exceptions. The main area that may involve Grey Nomads is protective clothing. For those who are working outdoors, sun protection would qualify. This can include sunhats and sunglasses. While not clothing, sunscreen is also included here. Other areas of clothing that may be deductible would include overalls and aprons, worn to protect ordinary clothing. Other protective clothing includes steel-capped boots, where the work involved may cause injury. Ordinary clothing, including jeans, are not protective clothing. Be aware that where clothing and other items, like sunglasses, are used for both work and other activities, the cost must be apportioned.
In conclusion, if you spend money and think there is half a chance it is qualifies as a tax deduction, keep the receipt. If you are uncertain whether you are entitled to deductions or tax offset, make sure you ask your tax adviser. The worst they can say is no.
Eric Taylor has been a registered tax agent for over 25 years. He is the principal of Grey Nomad Tax Advisers and his motorhome becomes his office while on the road. The information contained within this article is of a general nature and should not be treated as specific tax advice. No taxpayer should rely only on the information contained herein and should obtain information specific to their situation from a registered tax professional.
iMotorhome eMagazine, June 2016
The following article, written by Eric Taylor, was published in edition 97 of iMotorhome eMagazine in June, 2016 to assist Grey Nomads to meet their tax obligations and become aware of changes that had occured within tax legislation.