Today’s blog will outline some essential deductions for Australian income investment and frank distributions. If your trust received a dividend from a LIC directly and it included the LIC capital gain amount, you are allowed to claim a deduction of 50% of the LIC capital gain. If the LIC dividend is fully or partially franked, it is important to check label R for deductions in relation to Frank distributions and any LIC capital gain deductions for unfranked LIC dividends refer to label P for deductions related to Australian investment income and LIC capital gain.
Now, let’s check out the details of each item.
Item 16: It is for deductions relating to Australian income investment and Frank distributions.
Item 17: It covers deductions for the forestry-managed investment scheme (FMIS).
Item 18: It is for other deductions.
Forestry Managed Investment Scheme (FMIS) Deductions
It’s important to meet certain requirements:
- Your trust must have a forestry interest in the FMIS or have held one during the relevant period.
- The FMIS needs to satisfy the 70% direct forestry expenditure rule and your trust must not have day-to-day control over the scheme.
Remember, there are excluded payments that are not allowed to be claimed such as:
- stamp duty
- certain payments related to
- processing of felled trees.
Other Deductions Labeled as Q
It includes several expenses like:
- tax-related costs
- losses on traditional securities
- TOFA amounts from financial arrangements and more
If losses and outgoings are incurred to gain accessible income or for business purposes, then they are deductible. However, there are some restrictions, debt deductions for foreign source income and entertainment expenses are not deductible. For gifts to deductible gift recipients (DGRs), you are allowed to claim deductions but they cannot create a tax loss.
Lastly, the ATO have deductions for subscriptions which are expenses related to trade business or professional associations, journals and magazines utilised to produce accessible income. In addition to this, if you’ve assigned depreciating assets to a low-value pool, make sure to include the deduction year too. These are the key deductions for your Australian income. Don’t forget that keeping track of your deductions can help maximise your financial benefits for personalised advice and support. You can reach the best accounting firm in Melbourne for getting help with managing tax matters.
Dividend and Share Income Expenses
What you are allowed to claim:
- ongoing management fees
- fees for suggestions about changes in your investment mix
- the part of your costs that are for handling your investments, such as:
Some travel expenses
Borrowing costs and interest
the expenses of internet access
Computer’s declined value
- If you were a resident of Australia at the time a listed investment firm paid you a dividend and the payout contained a LIC capital gain amount, you would be entitled to receive 50% of the LIC capital gain amount.
What you are not allowed to claim:
- fees you incur to make an investment plan, unless you are continuing an investment business
- a portion of the interest costs incurred when borrowing money to purchase shares, units in unit trusts, and stapled securities under a capital protection borrowing arrangement. The cost of the capital protection function is viewed as including the interest.
Interest You Pay on Money You Borrowed
You can deduct the interest you pay if you borrow money to purchase shares or related investments from which you receive dividends or other taxable income. You can deduct interest costs only if they are used to generate income. If you borrow money to utilise for both personal and income-generating objectives, you must divide the interest among them. If you get an exempt dividend or other exempt income, you cannot claim a deduction.
If you don’t know what and how to claim tax deductions, you can seek help from professional accountants for small businesses. They can help you claim possible tax deductions you are eligible for to help you save more on taxes.
The blog helps taxpayers to maximise tax deductions to save more. Don’t hesitate to contact us at Reliable Melbourne Accountants. We’re here to help you navigate the complexities of taxation and financial management.