Archive for 'tax'
Lodging your tax return for the 2021-22 financial year?
As registered tax agents, we are able to assist you with the process of lodgement to ensure your compliance with the requirements of the ATO.
To ensure that your return is correct, here are our top nine key items to be aware of.
COVID-19 Support Payments/Natural Disaster Payments
Did you receive either a COVID-19 support payment or a natural disaster payment from the government to assist you in trying times? You need to check whether or not what you received needs to be included in this year’s return, as there may be different tax treatments depending on the payment (e.g COVID-19 Disaster Payment is not taxable).
If you are claiming a deduction on Rapid Antigen Tests for work-related purposes, you need to be certain that they are eligible. That is, from 1 July 2021, to claim a deduction for the cost of a COVID-19 test, you must:
- use the test for a work-related purpose to determine if you can attend or remain at work
- pay for a qualifying COVID-19 test, being a:
- polymerase chain reaction (PCR) test through a private clinic, or
- test listed in the Australian Register of Therapeutic Goods, including rapid antigen test (RAT) kits
- pay for the test yourself (that is, your employer doesn’t give you a test or reimburse you for the cost)
- keep a record to prove that you incurred the cost (usually a receipt).
You can only claim a deduction for the COVID-19 tests you paid for that were used by you to determine whether you may attend or remain at work.
Working From Home Expenses
If claiming work from home expenses in this year’s return, you can calculate it through the temporary shortcut method (all-inclusive), fixed-rate or actual cost methods (as long you meet eligibility & record-keeping requirements of the method that you chose. You also need to make sure that you don’t add additional expenses that are already included when using the temporary shortcut or fixed rate methods.
Make sure you have the correct records to back up your deduction claims as no receipts, logbooks or diary entries means no deduction.
Your bank interest statement is one of the records that the Australian Tax Office uses to pre-fill your return with high-certainty data – however, sometimes this isn’t ready as soon as your return is. This is because it is up to your bank to provide the ATO with this information for their pre-fill service, and some smaller banks may not be able to complete this until after July. As this is high-certainty data, it is data that can cause the ATO to red flag your return for audit purposes if it does not match what their records say if you elect to fill it. If you make changes to any bank interest pre-fill information where there is a certainty indicator, you’ll need to provide a reason for the adjustment.
Crypto & NFT Assets
Don’t get caught out by the ATO by trying to be clever with crypto & NFTs as it is not worth it in the long run.
Any capital gains or losses on disposal of crypto assets (coins, tokens and non-fungible tokens) during the 2021–22 financial year will need to be declared. If you received staking rewards or airdrops, make sure to include these as ordinary income. If you are in the business of trading crypto, income tax will also apply.
Rental Property Income
Did you receive any income from your rental property throughout the financial year? This needs to be reported in their return. This includes income from short-term rental arrangements, insurance payouts and bond money that was retained.
If you have an outstanding tax return due as of 30 June, your tax return due date is 31 October 2022 (if lodging through a tax agent/accountant). If all overdue prior year tax returns are lodged by 31 October, the tax return for the financial year will be due according to the normal lodgement program.
If you are lodging your tax return through an accountant and an exceptional or unforeseen situation occurs that impacts the process, don’t panic. Depending on the issues they may face, your accountant may be entitled to a lodgement program deferral or a supported lodgement program. We are able to discuss our options with the ATO to ensure the impact on you is minimised.
When it comes to your tax return, consulting with us is always a recommended course of action. As your trusted advisor, we are the mediators between you and the ATO when it comes to your tax return and any issues that may arise.
Selling your family home is usually exempt from capital gains tax (CGT). However, your entitlement to a full exemption may vary depending on your circumstances, such as renovations to your home or using it for business or Airbnb.
General records to keep which help to form part of the cost base (used to work out if a capital gain or loss occurs) include:
- A copy of the purchase contract and all receipts for expenses relating to the purchase.
- All records relating to the CGT event and all relevant expenses.
- Records of your costs of owning the property (interest, rates, land taxes, insurance premiums, the costs of repairs).
- Records of capital expenditure on improvements such as extensions, additions or improvements including initial repairs and maintaining the title or right to the title during your period of ownership.
The following records are necessary for homes used as the main residence:
If you use your home to produce income (running a business or renting a room out such as AirBNB) you will need to keep records of different costs depending on when you acquired your home.
For homes acquired on or after September 1985, you should keep records of expenses during the income-producing period and the proportion of the property used to produce income.
If you started using your home to produce income for the first time after 20 August 1996 – you generally need to know your home’s market value at the time you first used it to produce income.
An Inherited Home
Inheriting a home that was the primary residence of the person who left it to you means any capital gain on its subsequent disposal (selling of the home) may be exempt. Until you are sure of the circumstances, keeping records of the relevant costs incurred by you, the previous owner, or their trustee or executor is advisable.
Records do not need to be kept of the previous owner’s costs if you inherited the dwelling after 20 August 1996, the dwelling was their main residence prior to their passing away, and they were not using the dwelling to produce income at the time of their death.
In these circumstances, you will be taken to have acquired the dwelling at its market value at the date of death. If you have not obtained a copy of the valuation report from the executor or trustee, you will need to get your own valuation.
Are you up to date and aware of what you can and can’t claim on your tax return this year? Brushing up on the three rules of work-related deductions can make tax time a lot easier.
In order to be able to claim a deduction for a work-related expense on your tax return, you must meet the following golden rules of the Australian Taxation Office (ATO).
- The money must have been spent by you and you were not reimbursed by your employer for it.
- The expenses must directly relate to earning your income.
- There must be a record to prove the expense (such as a receipt)
These need to be claimed in the Work-related expense section of your tax return.
If the expense was for both work and private purposes, you only claim a deduction for what was the work-related use. You cannot claim a deduction if your employer pays for or reimburses you for any of these costs.
These work-related expenses may include:
- Motor vehicle expenses
- Travel expenses
- Clothing, laundry and dry-cleaning expenses
- Self-education expenses
If the ATO believes that your employer may reimburse you for your expenses they may ask your employer directly.
You may be able to claim other work-related deductions for expenses you incur in the course of earning your income. These are claimable in your tax return as an ‘Other work-related expense’.
Common claims in this section of the tax return include:
- Working from home expenses
- COVID-19 test expenses
- Phone, data and internet expenses
- Tools, equipment and other assets
- Union fees, subscriptions to associations and bargaining agents’ fees
When it comes to working from home expenses, you need to be careful of what you claim. To claim your working from home expenses you must:
- be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls
- incur additional expenses as a result of working from home.
You can claim a deduction for the additional running expenses you incur as a result of working from home.
Running expenses are expenses that relate to the use of facilities within your home and include:
- electricity expenses for heating or cooling and lighting
- the decline in value of office furniture and furnishings as well other items used for work – for example, a laptop
- internet expenses
- phone expenses.
You can’t claim a deduction for the following expenses if you’re an employee working at home. These include
- coffee, tea, milk and other general household items, even if your employer may provide these at work
- costs that relate to your children’s education such as equipment you buy – for example, iPads and desks, subscriptions for online learning
- items your employer provides – for example, a laptop or a phone
- any items where your employer pays for or reimburses you for the expense.
If your employer pays you an allowance to cover expenses, you can claim a deduction for the expense. However, you must include the allowance as income in your tax return.
You may also be able to claim a deduction for other expenses you incur that don’t relate to your work or income-producing activities. These are claimable in your tax return at the specific expense category (where available) or as an ‘Other deduction’.
Common claims in this section include expenses, such as
- Cost of managing tax affairs
- Gifts and donations
- Interest, dividend and other investment income deductions
- Income protection insurance
If you require assistance with ensuring that your individual income tax return is correctly lodged, a registered tax agent should be consulted (such as us). We’re equipped with the knowledge and tools to help you through this process.
No matter if you’re a dedicated crypto trader or just someone who’s been doing a spot of dabbling with the digital asset, it is still required that you let your accountant know just how much they’ll be dealing with this tax return season.
Cryptocurrency isn’t an easy tax matter to handle either.
According to the Australian Taxation Office, “if you are involved in acquiring or disposing of cryptocurrency, you need to be aware of the tax consequences. These vary depending on the nature of your circumstances.”
Your activity related to cryptocurrency will be taxed with either capital gains tax (CGT) or income tax, depending on the type of activity you undertake.
CGT will be applicable if you:
- Sell or gift your crypto
- Swap your crypto for another crypto
- Convert your crypto into fiat currency
Income tax will be applicable if you:
- Receive staking rewards
- Receive an airdrop.
If you conducted a crypto-to-crypto swap, you will still be taxed with CGT. This is because the ATO considers this to be a ‘disposal event’, which means that these types of transactions are taxable and must be recorded correctly as such.
To ensure that your accountant is equipped with what they need to know to handle your tax matters involving crypto compliantly, you will need to provide them with records to do with any and all transactions to do with your digital assets. These records could differ depending on the activity conducted with them.
You will need to keep either:
- records of receipts of transactions
- documents that display
- the cryptocurrency
- the purchase price in Australian dollars
- the date and time of the transaction
- what the transaction was for.
You will also need records showing:
- commission or brokerage fees on the purchase
- agent, accountant and legal costs
- exchange records.
You need to keep records of:
- software costs related to managing your tax affairs
- digital wallet records and keys
- documents showing the date and quantity of cryptocurrency received via staking or airdrop.
You will need to keep either:
- records of receipts of sale or transfer
- documents that display
- the cryptocurrency
- the sale or transfer price in Australian dollars
- the date and time of the transaction
- what the transaction was for.
You also need records showing:
- commission or brokerage fees on the sale or transfer
- exchange records
- calculation of capital gain or loss.
If you need assistance this year with your cryptocurrency and its tax obligations, you can speak to a trusted tax advisor or contact the ATO for further information.
If your business earns a part of its income in cold, hard cash, be prepared to have the Australian Taxation Office’s eyes on you this tax time.
To protect honest, compliant Australian businesses, the Australian Taxation Office (ATO) has placed a strong emphasis on targeting the cash and hidden economy (known to be a part of the shadow economy).
For example, they may be keeping a close eye on a sole trader electrician, whose reported earnings over the financial year versus their actual spending isn’t adding up. Or perhaps you have a side hustle (such as freelancing or selling plants at the market), and earn some cash-in-hand alongside your full-time job’s income.
The ATO will be watching these businesses and individual traders that deal predominantly in cash, with a focus on those that:
- Fail to meet super or employer obligations, and fail to register for GST or lodge activity statements.
- Operate outside regular small business benchmarks specific to their industry.
- Show discrepancies between what they have reported and ATO collected data relating to electronic payments.
- Operate and advertise as cash-only.
- Income does not correlate with the lifestyle of the business owner, i.e., assets and spending habits exceed what is expected of someone with their reported income.
- Pay their employees cash-in-hand.
- Estimate their sales and income.
- Use the ‘no sale’ and ‘void’ buttons on cash registers when taking cash payments.
- Do not reconcile at the end of the day and do not keep cash register tapes.
- Are reported to the ATO by members of the community or any third party regarding potential tax evasion.
- Are part of an industry that is known for dealing primarily in cash-only.
When out visiting cash-only businesses, the ATO will be working in unison with local authorities and industry associations to ask questions and discuss:
- Why the business operates primarily or only in cash.
- The need to lodge tax returns and activity statements.
- How to be compliant in relation to tax and super obligations.
- Different claims and tax deductions businesses can make.
- The general community’s preference for having EFTPOS or electronic payment options available to them.
- Benefits of electronic payment and record-keeping facilities.
- Relaying tools and services businesses can use if they are struggling to ensure they are compliant with Australian tax laws.
If the ATO comes across a business that is doing the wrong thing or failing to meet its obligations, they have a duty to take action. This may result in the business facing an audit and possible prosecution.
Its imperative that you are fulfilling your obligations and know where you stand, particularly with;
- Bookkeeping and record-keeping requirements
- Reconciliations between till takings (z-totals) and banking
- Consequences of failure to report all income (penalties, fines, interest, additional tax, additional GST)
- Consistency of business income between prior and current years, and with reference to lifestyle
If you do make a mistake upon completing your tax return but make a voluntary disclosure detailing your errors, the ATO will work with you to rectify this and create a solution.
It’s getting close to the time of year when your tax return may be on your mind.
You may have even already started looking into what is required to lodge your income tax return. Making sure that your details are correct and that any information regarding your earned income from the year is lodged is the responsibility of the taxpayer and their tax agent.
If during the course of the lodgement of your tax return you fail to meet and comply with the tax obligations expected of you as a taxpayer, the Australian Taxation Office has severe penalties that they can enforce.
Taxation laws within Australia authorise the ATO the ability to impose administrative penalties on taxpayers for failing to comply with their obligations.
As an example, taxpayers may be liable to penalties for making false or misleading statements, failing to lodge tax returns or taking a tax position that is not reasonably arguable. False or misleading statements have different consequences if the statement given results in a shortfall amount or not.
In both cases, the penalty will not be imposed if the taxpayer took reasonable care in making the statement (though they may still be subject to another penalty provision) or the statement of the taxpayer is in accordance with the ATO’s advice, published statements or general administrative practices in relation to tax law.
The penalty base rate for statements that resulted in a shortfall amount is calculated as a percentage of the tax shortfall, or in the case of no shortfall amount, as a multiple of a penalty unit. This percentage is determined by the behaviour that led to the shortfall amount or as a multiple of a penalty unit, which is as follows:
- Failure to take reasonable care – 25% of the shortfall amount or 20 penalty units
- Reasonable care is not taken if the taxpayer failed to do what a reasonable person in the same situation would have done.
- Recklessness – 50% of the shortfall amount or 40 penalty units
- Recklessness is determined as disregarding or showing indifference to a real risk of a shortfall amount arising that a reasonable person would have been aware of.
- Intentional Disregard – 75% of the shortfall amount or 60 penalty units
- Intentionally disregarding the law occurs if there is full awareness of a clear tax obligation, and the obligation is disregarded with the intention of bringing about certain results (underpaying tax or over-claiming an entitlement).
If a statement fails to be lodged at the appropriate time, you may be liable for a penalty of 75% of the tax-related liability if:
- A document that is necessary to establish tax-related liability fails to be lodged
- In the absence of that document, the tax-related liability is determined by the ATO.
To ensure that the statements, returns and lodgements are done correctly this coming tax season, and avoid the risk of potential penalties, speak with a trusted tax professional.
Registering for an ABN and applying for GST refunds when you don’t own a business or are not eligible is fraud.
The Australian Taxation Office (ATO) has identified a significant number of GST refund fraud attempts, totalling an estimated $850 million to around 40,000 individuals. This fraud involves predominantly participants inventing fake businesses to claim false refunds.
Sophisticated risk models deployed by the ATO, coupled with intelligence received from banks including through the AUSTRAC-led Fintel Alliance and the Reserve Bank of Australia, identified a recent spike in suspicious refunds. Currently, the ATO has stopped $770 million in payments from being issued.
The fraud involves offenders inventing fake businesses and Australian Business Number (ABN) applications, many in their own names, then submitting fictitious Business Activity Statements in an attempt to gain a false GST refund.
Currently, this fraudulent activity has been circulating as online advertising and content, particularly on social media and their platforms.
Reminders For The Community
- The ATO does not offer loans. If you see someone advertising a way to get a loan from the ATO, it’s not legitimate.
- The ATO does not administer COVID disaster payments.
- If you are not operating a business, you do not need an ABN, and you don’t need to lodge a GST return.
- Backdating your business registration so you can apply for a refund will flag you as high risk in our systems.
- False declarations may impact eligibility for other government payments.
- The ATO possess the data matching ability to detect these patterns and stop fraud.
- If something seems too good to be true, seek independent advice from an adviser who has no connection to the arrangement before taking any action, or phone the ATO.
What This Means For Businesses:
- Legitimate businesses may face extra steps to receive their refunds as extra controls are put in place.
- To prevent people from lodging fraudulent claims, the ATO has engaged tighter controls around ABN and GST registration.
Were You Involved?
The ATO is urging anyone already involved to come forward now on a voluntary basis rather than face tougher consequences later. They will be recouping the funds, and there will likely be a better outcome for you if you approach them first.
People who have participated in this fraud may have unwittingly followed advice they have read online, claiming to help access a loan from the ATO, or receive other financial government support such as a disaster payment.
However, for others where there was nothing accidental or unintentional about setting up a fake business in their own name and seeking an unearned refund, harsher penalties could be faced.
If you become involved in this arrangement, you need to speak with the ATO now. They will be able to support you with a range of self-help options. You may be able to correct it yourself, the ATO may be able to assist you, or you may be referred to a trusted advisor like a tax agent (such as us) to help you.
Cryptocurrency is a hot topic of discussion in the taxation industry, due to its digital nature as an asset and the reporting requirements behind the tax on its earnings
Cryptocurrency may seem like another form of money to you (albeit in digital form), but it isn’t to the Australian Taxation Office (ATO).
From their point of view, cryptocurrency is just another type of asset that people invest in, just like when they invest in shares. The tax treatment is fundamentally the same. If you buy for a dollar and then sell for $11 dollars then you have to deal with a ten dollar profit. That profit could be a capital gain or it could be quantified as simple business income.
What’s The Difference?
If you are a simple investor in crypto, you may have bought $10,000 worth of the currency, and held onto it for five years to then sell it for $25,000. The $15,000 “profit” from that sale would most likely then be treated as a capital gain. You would be required to pay tax on half of that capital gain at your marginal rate.
But let’s say you are trading in crypto on a regular basis as well as mining for coins. This might indicate that you are actually in the “business” of trading crypto (just as people can be in the business of share trading). In this case, you are taxed on your profits as income and not as capital gains.
Normally this wouldn’t make a big difference, as a trader does not tend to hold their stock for more than a year. This means that they would not be entitled to the capital gains tax discount, as it requires you to hold the asset for more than 12 months to be eligible.
It is also very important to understand that the ATO receives the trading data from all the crypto trading houses (including overseas trading houses). You won’t be able to get away without declaring any trading profit from any crypto that you own on your income tax returns this year.
Depending on the market, people may be able to make millions of dollars on the asset. However, the tax consequences of cryptocurrency can be fairly complicated and may require the assistance of a professional. If you are unsure as to how to treat your crypto gains and losses, please come and have a chat with us.
The end of the financial year is coming up next month (30 June), and you may be looking for ways in which you could make tax savings in this year’s tax return. This could be through tax deductions, expenses that you could make now for your work purposes or even with tax offsets introduced by the government. Whatever your tax situation, we’re equipped and ready to help you navigate the tricks and traps of income tax returns.
Upon completing a tax return, individuals are entitled to claim deductions for expenses that are directly related to their income. These can come in a variety of forms, but must usually be work-related to be claimable.
There are three requirements individuals must meet to be able to claim a work-related deduction:
- the individual must have spent their money and not be reimbursed for it
- the expense must be related to their job and;
- there must be a record, like a receipt, to be able to prove it.
If an expense was for work and private purposes, individuals can claim a deduction for the work-related portion.
Here are some common types of deductible expenses taxpayers like employees and rental property owners can claim this financial year:
Home Office Expenses
The past year may have seen you working more from home or remotely than ever before, and setting up a home office may have incurred a number of additional expenses. Some of the expenses that you may be able to claim as tax deductions include
- Phone and internet expenses
- Computer consumables (such as printer paper and ink) and stationery
- Home office equipment (such as computers, phones, printers, furniture, etc).
With home office equipment, you may be able to claim either:
- the full cost of the items (if less than $300 in value) or
- The decline in value (also known as depreciation) for items over $300.
Unless you meet very specific requirements, you probably will not be able to claim for home expenses, such as mortgage interest, rent and rates, or the cost of general household items.
If you plan to use the temporary ATO approved ‘shortcut method’ (80 cents per hour for all additional running expenses) to claim your deductions, you cannot claim any other expenses for working from home for that period. If you purchased a desk to use when working from home for example, you cannot claim a deduction for that separately as it is covered by the 80 cents per hour work rate. The deadline for this method of calculation is 30 June 2022 (unless it is extended).
Individuals can make a claim for work-related clothing expenses including compulsory, non-compulsory and registered uniforms, occupation-specific and protective clothing, and expenses associated with work-related clothing, such as dry cleaning, laundry and repair expenses.
Individuals can prepay self-education items before the end of the income year, including:
– course fees (not HECS-HELP fees), student union fees and tutorial fees
– stationery and textbook purchases
Other Work-related Expenses
Individuals can prepay the following expenses before 1 July 2022:
– union fees
– seminars and conferences
– subscriptions to trade, professional or business associations
– subscriptions to magazines and newspapers
If you are looking for assistance in working out potential expenses that you could incur prior to the end of the financial year, have queries about your claims or just want to prepare for 30 June 2022, start a conversation with us now. We are tax planning professionals ready and willing to help.
With more than a quarter of Australian employers currently having an apprentice or trainee on the books, it’s important that these young individuals understand what they may be able to claim work-wise on their tax returns this year (and that they should be preparing for it sooner rather than later).
You can claim a deduction for the cost of travel while performing your duties. This includes travel between different work locations, including for different employers. Normal trips between home and work are private in nature and can’t be claimed. This applies even if you:
- live a long way from your usual workplace, or
- have to work outside normal business hours (eg weekend shifts).
In limited circumstances you can claim the cost of trips between home and work, where:
- you had shifting places of employment (that is, you regularly worked at more than one site each day before returning home)
- you were required to carry bulky tools or equipment for work and all of the following conditions were met
- The tools or equipment were essential for you to perform your employment duties and you didn’t carry them merely as a matter of choice.
- The tools or equipment were bulky – meaning that because of their size and weight they were awkward to transport and could only be transported conveniently by the use of a motor vehicle.
- There was no secure storage for the items at the workplace.
If you claim car expenses, you must:
- keep a logbook of your work trips, or
- be able to show us your claim is reasonable if you use the cents per kilometre method (for claims up to 5,000 km only).
An important note to make is that your vehicle is not considered to be a car if it is a vehicle with a carrying capacity of:
- one tonne or more, such as a ute or panel van
- nine passengers or more, such as a minivan. In these circumstances (eg if you use a ute) you can claim the proportion of your vehicle expenses that relate to work – such as fuel, oil, insurance, repairs and servicing, car loan interest, registration and depreciation.
You also will need to keep receipts of your actual expenses.
You cannot use the cents per kilometre method for these vehicles. While it is not a requirement to keep a logbook, it is the easiest way to show how you have calculated your work-related use of the vehicle.
You can claim a deduction for self-education expenses if your course relates directly to your current job – for example, your apprenticeship course. You can also claim a deduction for the cost of travel from your home to your place of education and back, or your workplace to your place of education and back. You must keep records of your travel expenses to claim a deduction.
You can’t claim a deduction if your:
- study is only related in a general way or is designed to help you get a new job. For example, if you’re an apprentice carpenter you can’t claim the cost of study to enable you to become a builder.
- Your employer pays your apprenticeship course fees outright or reimburses you upon completion of your course.
Tools & Equipment Expenses
You can claim a deduction for tools or equipment you are required to buy for your job. If you also use the tools or equipment for private purposes, you can’t claim a deduction for that use.
For example, if you have a toolset that you use for private purposes half the time, you can only deduct 50% of the cost. If the tools or equipment are supplied by your employer or another person, you can’t claim a deduction.
If a tool or item of work equipment you only used for work:
- cost more than $300 – you can claim a deduction for the cost over a number of years (depreciation)
- cost $300 or less – you can claim an immediate deduction for the whole cost.
You can claim a deduction for:
- the cost of buying, mending and cleaning uniforms that are unique and distinctive to your job – eg a uniform your employer requires you to wear.
- protective clothing your employer requires you to wear – eg hi-vis vests, steel-capped boots and safety glasses.
You can’t claim a deduction for plain clothing worn at work, even if your employer tells you to wear it or you only wear it for work (eg workwear or tradie wear that is not designed to provide you with sufficient protection from the risk of injury at your worksite)
You may be able to claim other work-related deductions:
- protective equipment such as sunscreen, sunhats and sunglasses
- union and professional association fees
- phone expenses if you have to make phone calls or send texts for work.
Remember that you can only claim part of the expense that is work-related in this instance.
If you have any concerns or questions about your upcoming tax return, you can come and consult with us – we’re equipped to assist you in all tax-related matters.