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How to take advantage of the Government’s digitalisation incentives this financial year

Key Points:

  • $1 billion is being provided to support small businesses digitalise their operations with a new bonus tax deduction
  • For every $100 a business spends on digital economy technologies, they get a $120 tax deduction

As part of the Australian Government’s Digital Economy Strategy, $1 billion is being provided to support small businesses digitalise their operations with a new bonus tax deduction. 

SMEs with an aggregated turnover below $50 million per annum will be able to deduct an additional 20 per cent of the cost incurred on business expenses and depreciating assets that support their digitalisation. So, for every $100 a business spends on digital economy technologies such as flexible work solutions, cyber security, cloud adoption, e-commerce, or new software services, they get a $120 tax deduction.

This is a huge win for SMEs as it will help fund their digital transformation for the future. And yet most business owners are unaware of the current digitalisation incentives, whether it applies to them or how they can benefit. As the tax incentive is only available until 30 June 2023, it is simply a wasted opportunity to not capitalise on the investment boost being offered. It’s time to do your research and analysis, identify the areas within your business that would benefit from digitalisation, prioritise those needs and choose the right partners to leverage.

Senior leadership involvement in software purchasing was up 7 per cent since the start of the pandemic, and over the last two years, demands have caused IT budgets to skyrocket. Yet these budget increases cannot continue, so one critical solution is for SMEs to focus on optimising their tech stack. The question is, how do you get started?

1. Conduct a full business evaluation and digital audit

Analyse all pillars of your business to work out what can be done more efficiently and effectively and how can technology be the enabler. Assess the tech stack you already have and see if there’re ways to consolidate and optimise for performance.  Based on the known gap, research the digital tools, platforms, or solutions that will complement and enhance your current tech stack and enable you to increase productivity, profitability, and assist in improving the way of working for the future.

2. Prioritise your digital requirements

In Frost & Sullivan’s research, the top five selection criteria for businesses choosing a new IT solution were:

  • supporting IT processes automation 28 per cent
  • improving employee productivity 25 per cent
  • ensuring performance & reliability 25 per cent
  • value for money 23 per cent
  • improving IT administration/management 22 per cent.

The research also found that one of the most important digital solutions to invest in, is one which ensures the business can successfully run from anywhere. Yet SMBs are often lacking in a simple, reliable and scalable solution for the hybrid and remote working world in which we now live in and is here to stay.

3. Do your research

Decide which provider is the right fit for your business now and in the future. Conduct online research, talk to peers, and seek out expert advice to identify a shortlist of providers. Choose a solution that is suitable and cost effective for SMEs, yet with the capability and capacity to grow as the business scales, with on-demand support as and when required. For example, GoTo provides flexible work software that enables businesses to achieve a sustainable, resilient, and future-proof work-from-anywhere strategy. Significantly, it provides enterprise-grade technology specifically designed for SMEs, combining unified communications and collaboration as well as IT management and support solutions in one affordable application that can scale to facilitate future growth.

4. Invest

Don’t wait. The market is constantly transforming, and you don’t want to be left behind. The bonus deduction applies for qualifying expenditures up to $100,000 per annum incurred between 29 March 2022 until 30 June 2023. Consult us for advice on how to maximise this tax incentive today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

More ATO Action on Super Guarantee Non-compliance

The Australian National Audit Office (ANAO) has recently issued a report on the results of an audit conducted on the effectiveness of ATO activities in addressing super guarantee (SG) non-compliance. While ANAO notes that the SG system operates largely without regulatory intervention as employers make contributions directly to super funds or through clearing houses, the ATO does have a role as the regulator to encourage voluntary compliance and enforce penalties for non-compliance.

To measure this non-compliance, the ATO uses a measure called the SG gap, which is an estimate of the difference between the amount the ATO collects and what would have been collected if every taxpayer was fully compliant. The most recent data from the ATO was published in 2021 and indicated that the net SG gap in 2018-19 was around $2.5bn.

Overall, the ANAO report found that ATO activities addressing super guarantee non-compliance were only partly effective. This also held true for the risk-based SG compliance framework in which the ATO operates. It noted that while there was some evidence that the ATO’s compliance activities were improving employer compliance, the extent of improvement could not be reliably assessed.

The report made three recommendations to improve ATO compliance activities in relation to SG non-compliance. The first was that the ATO implement a preventative approach to SG compliance. The second was that the ATO assess its performance measures against the Public Governance Performance and Accountability Rule 2014 and enhance its public SG performance information. This includes setting targets for measures such as the SG gap and having explanations for performance results, as well as changes over time.

While the first two recommendations will have a negligible practical impact on day-to-day operations for employers in general, ANAO’s third and final recommendation may be a different story. Among other things, ANAO recommended that the ATO maximise the benefit to employee’s super funds by making more use of its enforcement and debt recovery powers, and to consider the merit of incorporating debtors holding the majority of debt into prioritisation of debt recovery actions.

In its reply, the ATO agreed with this recommendation and stated that while it paused much of its firmer super guarantee related recovery actions through the COVID-19 pandemic, those have now recommenced. With the recommencement of recovery actions, its focus will generally be on taxpayers with higher debts, although it will be prioritising taxpayers with super guarantee debts irrespective of value.

The ATO also agreed with the first two recommendations in whole or part. It says that it has already begun implementing a preventative compliance strategy using data sources such as Single Touch Payroll and regular reporting from super funds. It expects to continuing prioritising a preventative approach while also strengthening its data capability.

In addition, the ATO have indicated that they will continue to investigate every complaint received in relation to the non-payment of SG, taking action where non-payment is identified. These actions include the imposition of tax and super penalties, as well as the recovery and back payment of super to employees. In addition, it will be increasing transparency of compliance activities and employer payment plans so that affected employees are aware of the expected timing of back payments of super.

Need help with SG payments?

Employers should take note that the ATO is now back to its pre-COVID-19 setting in relation to late or unpaid SG. If you have issues with paying super guarantee or would like to make a voluntary disclosure before a potential ATO audit, we have the expertise to help. Contact us today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

Employees vs. Contractors: More Clarity Coming

The High Court recently handed down a significant decision dealing with the distinction between employees and independent contractors. The case concerned an “independent contractor” and a labour hire company. Although the ATO was not a party to either case, it has since released a decision impact statement as the High Court’s decisions impact on the ordinary meaning of the term “employee”.

In the case, a labourer had signed an Administrative Services Agreement (ASA) with a labour hire company to work as a “self-employed contractor” on various construction sites. The Full Court had initially held that the labourer was an independent contractor after applying a “multifactorial” approach by reference to the terms of the ASA, among other things. The High Court however, overturned the Full Federal Court’s decision and held that the labourer was an employee of the labour hire company.

The majority of the High Court stated that where the parties have comprehensively committed to the terms of the relationship to a written contract, and no party is disputing the validity of that contract, the characterisation must proceed based on the legal rights and responsibilities established in that written contract. It thus concluded that a multifactorial approach examining the relationship between the parties over the entire history of their dealings was unnecessary and inappropriate. In certain circumstances however, an examination of post-contractual conduct may be permissible, such as when the contract is not in writing, is oral/partly oral, being challenged or varied.

The minority view of two of the Judges considered the multifactorial test to be a well-established principle for characterising the totality of the legal relationship and that they were permitted to look at the whole employment relationship and not be restricted to the written contract. Even though there were different approaches taken in the judgement, the High Court agreed that the critical question in these circumstances was whether the supposed employee performed work while working in the business of the engaging entity.

“That is, whether the worker performed their work in the engaging entity’s business (i.e. the labour hire firm) or in an enterprise or business of their own.”

In its decision impact statement, the ATO noted that the High Court has not disturbed the well-established practice of examining the totality of the relationship. While the multifactorial test was rejected by a majority, there are still instances where it could be applied

In addition, the ATO noted that the decision recognised that long-established employment indicia are still relevant, although they must now be viewed through the focusing question of whether the supposed employee is working in the business of the employer. This, according to the ATO, reflects its current understanding of the application of the business integration test that the High Court has now elevated as one of the primary aspects of contractual examination.

As a result of the decision, the ATO will review relevant rulings that may be impacted by the High Court’s decision in the case, including super guarantee rulings on work arranged by intermediaries and who is an employee, as well as income tax rulings in the areas of PAYG withholding and the identification of employer for tax treaties.

Need help?

If you run a business and have dealings with contractors, we can help you understand how this decision will affect you. If you would like to keep up to date with any developments or changes to ATO’s rulings impacted by the High Court’s decision, contact our office today.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation.

COVID-Related Support for SMSFs Rental Relief

Your fund, or a related party of your fund, may have offered rental relief to a tenant due to the financial impacts of COVID-19.

If rent was reduced or waived, the ATO will not take any compliance action against your fund and/or ask your approved SMSF auditor to report any contraventions, as long as the relief is provided on comparable terms to relief offered by other landlords to unrelated tenants in similar circumstances. If rent was deferred, relief granted by the ATO will ensure that the deferral does not cause a loan or investment to be an in-house asset of the fund in 2019-20, 2020-21 or 2021-22, and future financial years, provided certain conditions are met.

Temporary changes to a lease agreement to provide for rental relief need to be properly documented, together with the reasons for those changes.

Please contact us as a formal variation of the lease may need to be executed.

In-house Asset Relief

If the value of your fund’s in-house assets exceeds 5% of the fund’s total assets as at 30 June of an income year, you are required to prepare and execute a written plan to get below 5% by the end of the following income year.

However, if you have not been able to execute the plan because of the financial impacts of COVID-19:

  • the ATO will not take any compliance action against your fund; and
  • your approved SMSF auditor will not need to report any contravention of the in-house asset rules to the ATO.

Loan Repayment Relief

If your fund has offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19, the ATO will not take any compliance action and your approved SMSF auditor need report any contravention of the super laws provided:

  • the relief is offered on commercial terms; and
  • the changes to the loan agreement are properly documented.

Other Relief

SMSF residency relief – may be available where your fund no longer satisfies the residency rules because you were stranded overseas for an extended period.

Loan repayment relief – may be available if your fund offered loan repayment relief because the borrower was experiencing difficulty repaying the loan due to the financial impacts of COVID-19.

LRBA relief – may be available if your SMSF has a limited recourse borrowing arrangement (LRBA) in place with a related party lender and the lender have offered loan repayment relief to the fund due to the financial impacts of COVID-19.

Disclaimer: The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners. Liability limited by a scheme approved under Professional Standards Legislation

Four priorities of the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

  • record-keeping
  • work-related expenses
  • rental property income and deductions, and
  • capital gains from crypto assets, property, and shares.

These ATO priority areas will ensure that there is an appropriate level of scrutiny on correcting reporting of deductions and income, so that Australia continues to have a strong tax system that can support the Australian community. Taxpayers can take steps to lodge right the first time.

It is important to rethink your claims and ensure you satisfy the following golden rules:

  1. You must have spent the money yourself and weren’t reimbursed.
  2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income.
  3. You must have record to prove it.

Record-keeping

We know there are still some weeks left until tax time, but if you start organizing the income and deductions records you’ve kept throughout the year, this will guarantee you a smoother tax time and ensure you claim the deductions you are entitled to.

For those people who deliberately try to increase their refund, falsify records or cannot substantiate their claims the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Work-related expenses

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Everyone’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring your family.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

It is encouraged to keep good records, as all rental income and deductions need to be entered manually. You can ask us for assistance. If the ATO notices a discrepancy it may delay the processing of your refund as the ATO may contact you or your registered tax agent to correct your return. The ATO can also ask for supporting documentation for any claim that you make after your notice of assessment issues.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or a capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

Crypto is a popular type of asset and it is expected that more capital gains or capital losses will be reported in tax returns this year. Remember, you can’t offset your crypto losses against your salary and wages.

Through data collection processes, it is known that many Australians are buying, selling or exchanging digital coins and assets, so it’s imperative that people understand what this means for their tax obligations.

Disclaimer:

The content of this summary is general by nature. We therefore accept no responsibility to persons acting on the information herein without consulting with DSV Partners.

Liability limited by a scheme approved under Professional Standards Legislation

ATO Turns Its Attention To Crypto

The meteoric rise of cryptocurrency (crypto) and NFTs (non-fungible tokens) has raised many eyebrows and has now also caught the attention of the ATO. Whether you’re trading crypto or NFTs as an individual or business, capital gains tax (CGT) applies to any gains you make regardless of whether the gain is in foreign currency or Australian dollars.

 

Most people are now familiar with cryptocurrency, which is a type of digital money created from code and usually takes the form of tokens or coins. The most well-known of which include Bitcoin, Ethereum, and Dogecoin. Non-fungible tokens are a comparatively more recent development which basically consists of a unit of data stored on a ledger to certify that a digital asset is unique. This has mostly been applied to artwork but can also include photos, videos and other types of digital files.

 

Based on its data holdings, the ATO will be writing to around 100,000 taxpayers with crypto assets explaining their tax obligations and urging them to review their previously lodged returns. It will also prompt another 300,000 taxpayers as they lodge their 2021 tax return to report their crypto capital gains or losses.

 

Individuals or businesses that dispose of crypto must work out if they made a capital gain or loss and report the resulting gain or loss in their tax return. Disposal of crypto can include exchange of one cryptocurrency for another cryptocurrency, trading, selling or gifting cryptocurrency, converting cryptocurrency to a government issued currency (ie Australian dollars).

 

Transfers of cryptocurrency from one wallet to another while maintaining ownership is not considered to be a disposal, however, if your crypto holding reduces during this transfer to cover a transaction fee, this fee is a disposal and has CGT consequences. In addition, if you acquire a small amount of crypto and use it within a short time to make personal purchases, the crypto may be considered to be a personal use asset and not subject to CGT.

 

In conjunction with contacting taxpayers, the ATO is also conducting a data-matching program which will consist of account identification and transaction data from cryptocurrency designated services providers from the 2021-2023 financial years. These details include the usual client identification information such as name, address, date or birth, phone number and email, but interestingly, now also includes social media account details. Transaction details will also be obtained which includes bank account details, wallet addresses, transaction dates/time/type, deposits, withdrawals, transaction quantities, and coin type.

 

It is estimated that records relating to approximately 400,000 to 600,000 individuals will be obtained each financial year under the program.

 

According to the ATO, while crypto appears to operate in an anonymous digital world, it closely tracks where crypto interacts with the real world through data from banks, financial institutions as well as online cryptocurrency exchanges to trace the money back to taxpayers. It will then match the data obtained from cryptocurrency designated service providers to either individual or business tax returns to ensure that the right amount of tax is being paid.

 

Need help to work out whether you need to pay CGT?

 

If you or your business has been dabbling in crypto and need help to work out whether those transactions are subject to CGT, we can help. The ATO is keeping a close eye on this relatively new financial area and it pays to get it right. Contact us today for expert help and advice.

 

Financial Help For Relocating Job Seekers

Job seekers can now take advantage of the government’s relocation assistance of up to $9,000 when they relocate to take up an on-going work, including an apprenticeship, provided the position (both work and apprenticeship) is for more than 20 hours a week with a duration of more than 6 months. The scheme commenced 1 May 2021 and is designed to help job seekers with the cost of relocating to take up vacant job positions.

 

Job seekers who are participating in employment service programs such as jobactive, Disability Employment Services, ParentsNext, Transition to Work, or Community Development Programs may be immediately eligible for help with their moving costs.

 

Where you relocate to take up ongoing work, the new location must be within Australia, be at least 90 minutes away from where you currently live (based on your normal mode of transport), and not be within the same capital city. Those individuals that relocate to a regional area may be eligible for up to $6,000 with an extra $3,000 available if a dependent is also relocating. For those relocating to another capital city, $3,000 of relocation assistance may be available with an extra $3,000 if relocating with a dependent.

 

However, relocation assistance for capital cities are only available if the destination city has a lower unemployment rate than the capital city you’re relocating from. For example, according to the latest unemployment rate published by Australian Bureau of Statistics, the NSW unemployment rate is 5.4% and Victoria is 6.1%. So, it is likely that an individual moving from Melbourne to Sydney would get the relocation assistance although they would not receive the assistance if they were moving from Sydney to Melbourne.

 

The relocation assistance received can be used for a variety of costs including rent, travel costs, and some employment-related expenses. The assistance can be received either as a reimbursement or the employment services provider can make payments directly to the supplier. Individuals experiencing hardship may also be able to obtain $2,000 up front to help with the cost of relocating. In addition, only one member of a couple may apply for relocation assistance.

 

To apply for the relocation assistance, individuals are encouraged to contact either their local employment services provider or the employment services information line. Evidence that you’ve received an accepted an offer for an eligible job in an eligible location will be required. Furthermore, you must also sign a relocation assistance agreement with an employment services provider and make available any quotes, invoices, and receipts of relocation costs.

 

If after accepting relocation assistance, you leave your job without valid reason, or you don’t commence employment or relocate, penalties may apply. However, in instances where you lose the job through no fault of your own, for example, a redundancy or a business closure, penalties would not apply.

 

Want to apply?

 

If you’re relocating by yourself or with your family for a job, we can help you work out whether you’re eligible for this assistance to reduce the up front costs associated with the move. Remember this assistance is also available for individuals on apprenticeships. Contact us today for expert help and advice.

 

Boosting Super: Low And Middle Income Earners

 

If you’re a low or middle-income earner, you can take advantage of the government super co-contribution scheme to boost your super. The scheme works like this, for eligible individuals, depending on the amount of personal contributions you make to your super account, the government will contribute a maximum of $500 to your super account.

 

For the 2021-22 income year, you are able to get the maximum $500 government co-contribution if you earn less than $41,112 for the financial year and make a personal contribution of $1,000 to your super account (provided you satisfy the other criteria). The $41,112 threshold includes your assessable income, reportable fringe benefits and total reportable super contributions for the year, less any allowable business deductions.

 

Remember, personal contributions do not include the compulsory super contributions that your employer makes on your behalf or contributions made through a salary sacrifice arrangements, and are typically made from your after-tax income.

 

Those individuals that have a total income of more than $41,112 but less than $56,112 for the 2021-22 income year are still able to get a co-contribution, although not at the maximum $500 amount. The entitlement to the co-contribution reduces progressively as income rises with a minimum contribution amount of $20 (if the co-contribution is worked out to be less than $20, the minimum amount of $20 will be paid).

 

In order to be eligible for the scheme, individuals must also satisfy the 10% test, which requires that 10% or more of your income be from either employment-related activities, carrying on a business, or a combination of both. The ATO notes that for this test, your total income is not reduced by allowable business deductions to ensure that self-employed individuals are not disadvantaged if they have low income/profit in any financial year.

 

  1. In addition to the two income tests above, there are also other eligibility criteria including:
  2. being an Australian resident or permanent visa holder (with the exception of New Zealand citizens on a prescribed visa);
  3. being under 71 years of age at the end of the financial year;
  4. have a total super balance less than the general transfer balance cap at the end of 30 June of the previous financial year (($1.6m before 1 July 2021 and $1.7m on or after 1 July 2021);
  5. have not contributed more than the non-concessional contributions cap ($110,000 for 2021-22 income year); and
  6. have not claimed a tax deduction for the personal contribution you have made.

 

Where you meet the eligibility criteria, the government co-contribution is automatically determined by the ATO when you lodge your tax return. In most cases, the amount is paid directly to the super fund to which the personal contributions were made. There are exceptions however, including situations where you’re retired and no longer have a super account, in those instances, the co-contribution will be paid directly to you.

 

If you think you’re eligible for super co-contribution but have not received a payment, you can contact the ATO either via phone or in writing to request and explanation. Where you’re eligible to the co-contribution and it has not been paid within 60 days of receiving all the required information, the ATO will pay interest as a way of compensation.

 

Want to take advantage?

 

If you’re a low or middle income earner and would like to take advantage of the government co-contribution, we can help you work out the optimal amount of personal contribution to boost your super. We can also help if you think you’re eligible and have not received a co-contribution. Contact us today.

Drawing On Super To Buy Your First Home

Saving for your first home? In a market where owning your home is increasingly out of reach for many, the First Home Super Saver (FHSS) scheme offers some practical hope. Here we look at how it works.

 

Where super was once locked away until retirement, you can now actively use its tax concessions to save up to $30,000 towards your first home, and then access your savings when you’re ready to buy. But this scheme is not for the faint-hearted, with lots of steps to climb before you get to your new front door.

 

Eligibility

The FHSS scheme is clearly for first home buyers – those who are buying or constructing their first home in Australia. But those buyers must:

-be 18 years or older;
-have never owned a property in Australia (being a freehold interest in real property, a long-term lease or a company title); and
-only apply for the scheme once.

However, there is provision for owners who have previously lost their property through financial hardship to be considered eligible for the scheme.

 

The good news is that there is no limit on the number of those eligible to share in the purchase of the same home under the scheme. So, couples, siblings and friends – as long as they meet the FHSS requirements – can pool their FHSS contributions towards the one purchase.

 

A further caveat is that you either live in the home you’re buying or you intend to do so for at least six months within the first year of ownership.

 

The scheme

The FHSS scheme refers only to contributions made since 1 July 2017. The scheme allows you to release up to $15,000 of voluntary contributions you’ve made to your super in any one financial year, and up to $30,000 in contributions in total, plus all the associated earnings, subject to contribution caps.

 

To be eligible, these contributions:

-are those made by you as the member or by your employer (but do not include compulsory super guarantee contributions – there are other specific exclusions so it is important to check with your adviser); and
-can be made up of concessional and non-concessional contributions, but only 85% of eligible concessional contributions can be released.

 

Get the sequence right

While you’re house hunting, it’s important to be clear on the FHSS process ahead. Once you’ve saved the final amount and, before signing a contract to purchase your home or applying for the release of your FHSS funds, you must apply to the ATO, and obtain, an FHSS determination. This determination will set out the maximum amount that you can release under the scheme.

 

Once you receive the determination you can then make a valid request to the ATO to issue an authority to your super fund for the release of an amount up to the maximum in the determination.

 

Your fund will then pay the released amount to the ATO but this may take about 25 days, so timing can be critical particularly if the funds are needed for the deposit.

 

If eligible, you can enter into a contract to purchase or construct your home either:

-as soon as you make the request to release the funds (rather than when the funds are released); or
-up to 14 days before the date you make this request.

You have up to 12 months after you’ve requested the release (unless more time is allowed by the ATO) to sign a contract to buy it.

 

Once you finally do sign your contract, you must notify the ATO within 28 days that you have done so.

 

All in order

It’s important to note that there’s an ordering rule for release of your super savings.Contributions are counted in the order in which they are made to your fund, from earliest to latest and also non-concessional contributions are counted before concessional contributions.

 

If you decide not to go ahead with the purchase you must notify the ATO within 12 months of making the release request, and either take advantage of a further 12-month extension or recontribute an eligible amount back into super as a non-concessional contribution. Alternatively, if you fail to comply or decide to hang onto your FHSS released amounts they may be subject to 20% FHSS tax.

 

Guidance at an important time

If drawing on your super to buy your first home is right for you, take care not to mess with the rules, or you’ll miss out. We know the traps and can provide expert advice to guide you safely to your front door.

The ATO’s Top Four Mistakes To Avoid This Tax Time

Getting around to your taxes soon? The ATO has revealed the most common mistakes taxpayers tend to make at tax time, with thousands of lodgers caught out every year. Don’t be one of them! Stay ahead of the ATO by knowing the traps and seeking expert help when you’re in doubt.

 

It’s tax time, and as with every year the ATO is warning individuals to take care with their returns. But did you know that the ATO is using increasingly sophisticated data analytics to detect problem claims? It’s more important than ever to get it right. Here are the top four mistakes the ATO says you should be avoiding:

 

1. Lodging before you have all of your income data

Have you confirmed your income from all sources? The ATO says taxpayers who lodge early are more likely to submit incomplete data that requires correction later – and a tax bill – when the ATO eventually uncovers this.

 

The ATO matches data with a wide range of third parties including banks, sharing economy platforms, rental property managers, cryptocurrency exchanges and share registries. This may take place several months after you’ve lodged your return.

 

If you do realise you’ve made a mistake or omitted income, you should tell the ATO promptly. In cases where penalties might apply, it will generally work in your favour if you voluntarily came forward about the undisclosed income. The ATO recommends waiting for your original return to be processed and your notice of assessment to be issued before lodging your amendment. This can be lodged by you or your tax agent.

 

2. Getting work-related deductions wrong

Work-related expenses are some of the most popular deductions claimed, but the rules can be tricky. While there are some general principles that apply – such as only claiming for the work-related portion of an expense and not for any portion relating to personal use – the ATO has specific guidelines in place for all the different categories of expenses.

Clothing, self-education, home office expenses and travel all have detailed rules about what you can claim, how to calculate your claim and what records you must keep. For this reason, the ATO cautions against relying on advice from friends and colleagues as to what you can claim. Getting help from a professional tax adviser is the best way to ensure you not only get your work-related claims right and avoid trouble with the ATO, but also obtain the maximum deductions you’re entitled to.

 

3. Not keeping receipts

Generally, you must keep adequate records to support your claims, including receipts. In some cases, you’re exempted from having to keep receipts (eg for clothing claims under $150). However, the ATO can still ask you to explain how you calculated your claim.

The ATO’s “myDeductions” app helps taxpayers to track their expenses, record their work-related car trips and store photos of receipts. When it’s time to lodge your return, you can export and email the data (to your tax agent or to yourself) and you can also upload the data to prefill your tax return, which your tax agent can also access through their online portal.

 

4. Claiming expenses you never incurred

In order to claim a deduction, you must have spent the money. Even though the ATO has some relaxed rules where you aren’t required to keep receipts up to a certain threshold, the ATO can still ask questions to verify whether you actually incurred the expense. As the ATO stresses, there’s no such thing as an “automatic” deduction.

You also can’t claim expenses that your employer has reimbursed you for. If you receive a specific allowance (eg for clothing) you must generally declare that allowance in your tax return, and you can then deduct the expenses you actually incurred.

 

Need help?

Don’t risk headaches with the ATO – get the tax professionals on side. Talk to us today for expert assistance and keep your tax time as stress-free as possible.

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