The Australian government has announced that the $1.58 billion income tax cut package has passed through parliament and that means many individual tax payers will see some extra dollars in this year’s tax refund. However, before you spend the extra $1,080 that is being publicised it is important to remember that each taxpayer’s circumstances are different. This is not a guaranteed refund.
The Australian Taxation Office (ATO) are cautioning taxpayers not to rush into filing their return this year. The first few weeks of the financial year are all about collecting information and those who lodge their returns early may neglect to report important information.
Here are three important things to remembers when preparing your returns this year.
- Single Touch Payroll.
Business owners should be aware of Single Touch Payroll (STP) which is mandatory from 1 July 2019. It is a new reporting regime where employers report the payroll details to the ATO each pay run. This year has been a transition year with many businesses adopting STP. If your employer is reporting through STP you will not get a group certificate this year. Instead the information will be available in your my.gov account.
- Dodgy claims
The ATO have been cracking down on unjustified deductions over the past few years. In 2015, the ATO estimated the tax gap (the difference between the tax that should have been paid and what was paid) for individual tax payers at $8.7 billion. The shortfall is largely due to overstated tax deductions and the ATO will continue to focus on overstated deductions in 2019.
A tax deduction must relate to the work you are doing and must be adjusted for any private usage. If audited, you will need to justify your claims with receipts and log books. While you may be able to justify in your mind how the expense is related to work, the ATO will not be as easily convinced.
- Prefill Information
The ATO are getting more information each year from external sources making it easier to accurately prepare tax returns. This year, it is no longer a requirement for your private health fund to send out a statement as details will be advised to the ATO. Interest and dividend earnings should be pre-filled in your return. They ATO will remind you if you have sold a rental property. We are living in the age of “Big Brother”, which can make life easier, but it is becoming much harder to hide things.
Be honest in your dealings with the ATO and if in doubt seek the advice of an expert. Hopefully you will reap the benefits of the new tax offset and get to enjoy spending that extra money. The ATO are very aware of dodgy claims and are increasing their audit activity each year.
4 simple things to consider about tax deductions you are claiming
- Have you actually spent the money and not been reimbursed by your employer?
- Is the expense directly related to the work do?
- Do you have a record to prove it?
- Do you need to adjust the claim as it is only partly used for work?
Tips to help put together your claims this year
Claiming motor vehicles on a tax return can be complicated. If you frequently use your car for work you should have a valid logbook. With a logbook, you can claim the work related proportion of your vehicle expenses. If you use your car infrequently for work purposes you can claim 68 cents per kilometre of travel (up to 5000kms per car). You do not need a logbook but you need to explain how you came up with the claim. Consider whether you used your car to see clients, pick up items for your employer or attend a course. Google maps is a great way to work out the kilometres you would have travelled if you have not kept a record.
Many people work from home at least part of the week or after hours. If you have a dedicated office space you can claim the running expenses using an actual expense calculation or a fixed rate of 52 cents per hour. You may also be able to claim a portion of your phone and internet as well as any stationery items for your home office.
Laundry and Uniform
Be careful with uniform claims as they are a focus of the ATO. To claim a uniform, or laundry, it must be either occupation specific, protective clothing or unique and distinctive to your organisation. Having to wear a suit or black work pants to work is not considered a uniform. A lot of taxpayers automatically claim $150 for laundry without calculating that figure. The calculation should be made based on $1 per load of work clothes and 50 cents for a shared load. Do you make three work clothes only loads of washing per week?
The ATO has easy to understand fact sheets on its website if you need some more information. Make the most of tax time but do not get caught out. If in doubt, seek the help of a tax agent. Most importantly, enjoy spending your tax refund.
The Carousel would like to thank Joanne McCauley for her article.
Jo McCauley is a CPA accountant with a passion for helping small business owners get the best results. She helps them to understanding how the tax system works, incorporate technology into their business, and interpret the information the numbers are telling them. As the Managing Partner of Jigsaw Tax & Advisory, Jo has many years of experience in tax and accounting. Noticing a trend in the struggles for small business, Jo foundered Tradie WAGS to help educate and empower the partners of Tradies in running their family business. With a number of Tradies in her own family, Jo can easily identify with challenges and enjoys seeing small businesses thrive as a result of her help.