Tax

17 Jul

Posted at 17:30h in News, Tax

The shortcut method of claiming a rate of 80 cents per hour worked from home is no longer available – the measure was temporarily introduced during the COVID-19 pandemic and ended on 30 June 2022.

Instead, you can now claim deductions using the revised fixed-rate method, at a rate of 67 cents per hour, as long as you incur deductible expenses while genuinely carrying out work from home, and keep appropriate records, like timesheets for your work hours and receipts for the expenses.

If your work from home doesn’t meet these conditions, you won’t be able to rely on the fixed-rate method and will need to calculate and apportion the actual expenses. You can also simply choose the actual expenses method if it suits your situation better.

The fixed-rate method covers work-related costs like electricity/gas, stationery, your mobile/landline phone and internet. If you use the fixed-rate method you can’t also claim additional deductions for any of these categories. Depreciation of furniture and equipment (eg if you buy a desk, computer and printer for work) may be calculated separately (and in addition) to the fixed rate.

14 Jul

Posted at 17:57h in News, Tax

The Federal Government has warned of scammers targeting Australians ahead of tax time 2023. The number of scam reports received to date this year has topped 19,843 and impersonation scams are becoming increasingly commonplace. These scams typically consist of unsolicited contact through SMS, email, or on social media offering refunds or help to solve tax issues. The ATO recommends not engaging with any unsolicited contact, ending any conversations as soon as possible and independently looking up the ATO’s number to initiate contact in order to verify any communication is genuine.

Tax time scams typically involve the impersonation of the ATO to obtain personal information or solicit unlawful payment. The common tricks tax scammers are using recently include:

  • posing as the ATO on social media and offering to help individuals with tax and super questions, which require the individuals to hand over personal information such as tax file numbers, dates of birth, names, addresses etc;
  • luring unsuspecting individuals with an offer of a fake tax refund in return for the provision of personal information;
  • initiating conversations via phone, social media private messages, email and SMS, attempting to keep the individual engaged for as long as possible through various means including threats and intimidation, offers to help and so on, to either collect personal information or solicit payment.

Many scammers will use spoofing technology to show a real ATO or Australian phone number in the caller ID or call log. The ATO’s genuine calls will be in fact be shown as No Caller ID. The ATO will also never insist on a conference call with a third party, not even your own tax agent or law enforcement officers.

In terms of SMS and emails, the ATO will never send an unsolicited message asking you to return personal identifying information through these channels. It also does not send links or attachments for you to open or download.

If you think you may have fallen victim to a scam, you should contact your bank or financial institution, make an official report to local police, and report the scam through either the ATO’s phone hotline or its specific scams email address.

Tip: The ATO now has a dedicated team that monitors queries and assists taxpayers who have fallen victim to scammers. You can look up and use the ATO’s phone numbers and other contact details on the official ATO website, www.ato.gov.au.

12 Jul

Posted at 17:46h in Tax

The ATO has flagged rental properties and holiday homes as an area of particular focus for this 30 June.

It’s important to remember that the ATO receives information from sources like sharing economy platforms, rental bond agencies and state and territory revenue authorities that enables it to detect under-reporting of income and inappropriate deduction claims.

11 Jul

Posted at 17:42h in Accounting, Business Advisory, News, Tax

The immediate deduction for the cost of eligible depreciating business assets that has been available under the temporary full expensing concession since 2020 has now ended.

The instant asset write off method has now been reinstated for the immediate deduction of the cost of an asset.

From 1 July 2023, an immediate deduction will only be available to small business entities (with aggregated turnover less than $10 million) for assets costing less than $20,000.

07 Aug

Posted at 17:18h in Accounting, SMSF, Tax

The self managed superannuation fund (SMSF) space has always been a complex area for trustees, beneficiaries and advisers. In the past few years, the ATO has made many concessions and has put compliance action on hold because of COVID-19. However, for the 2022–2023 year and beyond it’s looking to scale up its compliance program as a reaction to indicators of heightened risk in the sector.

Recent statistics indicate that there are around 600,000 SMSFs, with over 1.1 million members holding an estimated total asset value of $876 billion.

While the ATO’s main compliance focus will always be on any activity that puts retirement savings at risk or inappropriately takes advantage of the concessional tax environment, in the near-term it will focus specifically on illegal early release of super in all forms. This is when individuals access their retirement savings before a condition of release has been met. This type of activity is currently on the rise.

One of the big red flags that the ATO looks out for is when individuals establish their SMSF and initiate a rollover but then fail to lodge a corresponding first annual return. This is a good predictor that an illegal early release has occurred, either as a result of deliberate behaviour or participation in a scheme.

New registrants that do not lodge will now be targeted with a “three strikes and you’re out” compliance campaign. The ATO will first issue a “blue letter” that encourages the SMSF trustees to take immediate action to lodge, offering a pathway for those who need support. If no response is received from the blue letter, the ATO will follow up with an “amber letter” warning trustees of the consequences of failing to lodge their return. Finally, if no response is received from the amber letter, a final warning or “red letter” will be issued advising the trustees that the ATO has commenced the disqualification process and will consider other enforcement action.

The ATO issued its first and second batches of “red letters” to funds in early April and June 2022.

As part of our compliance services, McGregor West will identify compliance issues such as the above, and alert Trustees to potential ‘red flags’.

05 Aug

Posted at 17:13h in Accounting, Tax

With COVID-19 lockdowns and restrictions in the rear-view mirrors of most of the country, the ATO is also beginning to resume ordinary compliance activity levels. One of the many areas it will be paying close attention to this tax time is “asset wash sales”.

Tip: An asset wash sale involves a person or business disposing of assets just before the end of the financial year. After a short period of time, they then reacquire the same or substantially similar assets. The ATO views these transactions as a form of tax avoidance.

Although there may be legitimate reasons for selling and then reacquiring the same or substantially similar assets, a wash sale is different from normal buying and selling as it is usually undertaken for the artificial purpose of generating a tax benefit – such as a capital loss – in the current financial year.

The assets involved in wash sales are not necessarily traditional assets such as shares. Taxpayers could also be disposing of crypto-assets and reacquiring them later as a part of a wash sale. With the price of many crypto-assets at a low ebb, people looking to rid themselves of these assets need to be careful they do not inadvertently attract the attention of the ATO.

To stamp out this behaviour this tax time, the ATO will use analytics to identify wash sales through data from various share registries and crypto-asset exchanges. Where the system identifies a wash sale, the capital loss claimed by the taxpayer in their tax return will be rejected. The Commissioner of Taxation may then make a determination to adjust their tax situation, and compliance action and additional tax, interest and penalties may be applied.

05 Aug

Posted at 16:55h in Accounting, Tax

Small businesses are again in the ATO’s sights this tax time, with a focus on stamping out deductions not related to business income, overclaiming of expenses, omission of business income and insufficient records to substantiate claims.

The ATO receives external data from a variety of sources, including the taxable payments reporting system for certain industries. This data can be used to data-match information included in tax returns to ensure completeness and accuracy.

Businesses can only claim what they are entitled to, and the claiming method may differ depending on the type of business structure. For example, sole traders need to claim deductions in their individual tax return in the “Business and professional items” schedule, while partnerships, trusts, and companies need to claim deductions in their respective tax returns.

05 Jul

Posted at 08:20h in News, Tax

The end of financial year is fast approaching, and people with excess savings or who have received a bonus since the beginning of the year may want to use the extra cash to grow their super. One of the easiest ways to grow your super and get a tax deduction at the same time is to make a personal superannuation contribution.

If you’re considering making a personal contribution to your super and would like to claim a deduction, it’s important to remember to give the required notice to your super fund before making a claim in your tax return. There have been recent cases of taxpayers being denied deductions for personal super contributions where they didn’t provide the required notice to a super fund in time.

A deduction for a personal contribution can only be claimed if the income earned came from your salary and wages, a personal business, investments, government pensions or allowances, superannuation, partnership or trust distributions, or a foreign source.

If you’re aged between 67 and 74 years, you must also meet the work test or satisfy the work test exemption criteria to be able to claim a deduction for any personal contributions made. There are also contribution deduction rules for people aged 75 years or older.

The ATO provides a standard form for giving the required notice to super funds. Many super funds also have their own online forms which can be lodged easily. Your fund will then send a written acknowledgment to the ATO indicating that it’s received a valid notice from you. Only then can you claim the deduction in your tax return.

04 Jul

Posted at 08:15h in Business Advisory, Related Services, Tax

From 1 July 2019, new rules were introduced that allow eligible people to claim tax deductions for the unused portion of their super concessional contributions caps from prior years. This brings tax deductions into the current financial year that would have otherwise been in excess of the ordinary annual concessional contribution cap.

A concessional contribution is defined as a contribution to a super fund before tax. This type of contribution is taxed at a flat rate of 15% in your fund.

Concessional contributions can come from several sources: from your employer, from pre-tax salary sacrificed contributions you may elect to make through your employer, and from contributions you make personally and claim a tax deduction. The combined total of these contributions counts towards your concessional contribution cap.

The 2022 financial year concessional contribution cap is $27,500, an increase from the previous financial year’s $25,000.

The new rules give allow you to look back on each financial year from 1 July 2018 to calculate the “unused” portion of your concessional contributions cap in each financial year. You can then “carry forward” and, when desired, “catch up” and claim the unused portion in a later financial year, which can achieve a better tax outcome for that financial year, and maximise the amount you’re able to contribute to super.

You can only claim unused super contributions from previous years if your total super balance is less than $500,000 at 30 June in the financial year before the year when you make catch-up contributions, and unused concessional cap amounts can only be carried forward for a maximum of five years.

What are the benefits?

Making a catch-up contribution is an easy way to boost your super balance at a time when you have the financial resources to do so, while offering significant tax benefits. For example:

  • Your work patterns and income may fluctuate from year to year. A tax deduction for super contributions may not be needed in a low income year, but may be useful the following financial year if your income is significantly higher.
  • Restricted cash flow may prevent you from making super contributions, but you can make catch-up contributions when your situation improves.
  • Your usual income may mean there’s no real tax advantage in making super contributions, but if you sell a large capital asset like shares or a rental property, you could have a significant capital gain. You could then make a catch-up super contribution to reduce your taxable income in the year of that sale.

TIP: Concessional superannuation contributions can be a complex area. It’s best to seek professional advice so you can implement the right strategies for your circumstances and maximise your super savings.

03 Jul

Posted at 08:13h in News, Tax

One of the new Federal Government’s policies, announced as part of its election platform, is to make certain electric vehicles exempt from import tariffs, and from the fringe benefits tax (FBT) imposed on electric cars that are provided through work for private use. These exemptions would apply to vehicles valued below the threshold for the luxury car tax for low-emission vehicles.

Under the current statutory formula for valuing car fringe benefits, electric cars are arguably at a disadvantage compared to fossil fuel-consuming cars, but the FBT exemption proposal would tilt the balance very much back in favour of the electric car.

For example, an employee on a salary of $150,000 who salary-packages a $60,000 electric car with annual running costs (including lease payments) of $17,000 net of GST could expect to be around $4,500 better off annually after tax, due to the change in FBT treatment.

The exemption from the 5% import tariff should also make certain electric vehicles cheaper for Australian consumers and businesses.

The government has indicated that the electric car discount policy would be reviewed after three years, taking account of developments in the adoption of electric cars by that time.