WHAT TO WATCH OUT FOR THIS TAX TIME

“172,000 Individual ITR’s lodged on 1 July”

*accountants everywhere cringe*

Despite the ATO saying that they were not even going to start processing any tax returns at all until atleast 7th of July or paying refunds until the 16th of July, so many people are still rushing to lodge their taxes early July.

The ATO have been reminding taxpayers of the risks of lodging so early and their recommendation is that everyone should hold off until the end of the July to lodge, as this allows your employers, banks, private health providers and government agencies to get your important information ready for the ATO

Lodging too early may mean that your refund takes longer to process and there may be mistakes and the ATO will potentially have to adjust your return later.

With ATO data matching programs increasing every year, more than 230,000 tax returns are being adjusted by the ATO because they didn’t match up to third-party data. Many individuals are failing to include all their income and are getting hit with tax bills later in the year, which could easily have been prevented by holding off lodging by just a few weeks.

Where the ATO has set their sights for 2021 Tax Returns:

Cryptocurrency

The tax office expects to have the details of up to 600,000 individuals who bought and sold cryptocurrency this year.

This will include names, addresses and phone numbers as well as transaction details such as bank accounts, transaction dates and coin type.

The ATO will keep this information for several years to cross-reference prior data for taxpayers collected under this program.

The assistant commisioner commented about how the ATO are looking at cryptocurrency and tax obligations:

“We are alarmed that some taxpayers think that the anonymity of cryptocurrencies provides a licence to ignore their tax obligations. While it appears that cryptocurrency operates in an anonymous digital world, we closely track where it interacts with the real world through data from banks, financial institutions and cryptocurrency online exchanges to follow the money back to the taxpayer.”

Shannon is highly knowledgeable in cryptocurrency tax requirements and can make sure that your return is done correctly. Book Now

Properties

An extensive data-matching program is being used to identify taxpayers that are receiving income from short-term rentals through online platforms.

The information that the ATO receive include income per listing, listing dates, enquiries, booking rates and prices charged per night.

The tax office estimate that 190,000 Australians rental records will be examined to check that income has been declared and flag over-claimed deductions.

The ATO also receive information on long-term rentals from State and Territory Bond Boards.

We have increased our checklists and workpapers for all clients to prepare for increased audit activity here. Shannon is also very familar in these tax areas having a short-term rental and long-term rental herself.

Employment Tax Deductions

The ATO warned taxpayers that they will be setting their sights on work related expenses that are ‘copy and pasted’ this year with working from home, personal protective equipment, clothing, laundry, self-education, car and travel the key ones to be targeted.

You may be flagged by the tax office if your claims are much higher than someone else with a similar job and income, or say if your working from home expenses increase but then your travel, motor vehicle, uniform claims don’t decrease.

Commonly heard by accountants is “same as last year” or “just the maximum without receipts” which is fine if you can substantiate that but you cannot cut and paste previous year’s claims without evidence and it is a common misconception that there is a minimum standard deduction that you are entitled to – you still must be able to show how you incurred that expense. 

Again, we have increased our checklists and workpapers to prepare for the increased ATO attention. 

COVID and Tax

• The ATO have extended the .80c per hour method this year for working from home claims, however we find that this does not result in the highest deduction for 90% of our clients. There are a number of different methods to choose from and you are allowed to pick the most effective method.
• Personal expenses like coffee, tea, toilet paper, childcare or children’s education are not deductible.
• JobKeeper can change the result of many taxpayers refunds this year, and sole traders need to remember to include their payments as assessable income for their business.
• If you have close contact with clients or customers, don’t forget to submit us your receipts for gloves, face masks and hand sanitiser as the ATO are allowing these claims if you are eligible.
• As the budget was pushed back last year, the tax brackets changed part way throughout the year which meant many Australians were overtaxed for a few months which may see a bump in their refund.

Need help sorting your 2021 tax return? Email us at hello@elevatetax.com.au or call (08) 97215725 or book here.