New Year delight


Will your tax return be a New Year delight?

For those of you dreading that tax return, don’t delay, there may be a refund on the way.

From 1 July 2016, the marginal tax rate of 37% started at $87,000 instead of $80,000.

Employers would have reduced the amount of tax withheld from your pay from 1 October 2016, so there are potentially two (or more) months of higher tax withheld from your pay that you could get back, by way of a refund, when you lodge your 2017 tax return.  

So if you haven’t provided us with your annual tax information, now is a good time to do it so that we can start to prepare your income tax return.

To help you prepare for your tax return, here are some tips on the types of claims that are now coming under scrutiny by the ATO, and what you need to do to minimise your chance of being audited.

What do we need?

So that we can process your tax return smoothly and quickly, please supply us with the following:

Ÿ          Tax File Number (new clients);

Ÿ          ABN (for any freelance or contract work);

Ÿ          annual payment summary issued by your employer detailing how much your earned and how much tax you paid in the financial year;

Ÿ          ABN-related summary of earnings and copies of all invoices;

Ÿ          private health insurance annual statement – required to avoid Medicare Levy if earnings are over the threshold;

      Ÿ   investment property annual statement – outlining rental income earned and expenses to be offset;

Ÿ         bank statements – these can be used as records of purchases, against which you may be able to claim deductions;

Ÿ          utility bills if you need to claim home office expenses;

Ÿ         receipts of work-related expenses;

Ÿ         logbook, or diary for work-related expenses (ie, car, travel).

If you’re unsure about what claims are appropriate in your industry, make an appointment with us, or give us a call and we can go through this with you.

When considering your work-related claims, keep in mind that the ATO is coming down hard on excessive or false claims under their “don’t dodge when you lodge” campaign.

Taxpayer pitfalls in the Digital Age

The ATO is coming down hard on excessive or false claims under their “don’t dodge when you lodge” campaign.

Aided by sophisticated analytical technology, the ATO can use real-time data to assess and compare claims across occupations and income brackets, which means, as ATO Assistant Commissioner, Kath Anderson states “wrongdoing can’t fly under the radar. If a claim raises a red flag in the system, auditors will investigate further”.

In 2015–2016 the ATO conducted around 450,000 reviews and audits of individual taxpayers, resulting in adjustments of nearly $1 billion in income tax, and prosecuted over 1,300 taxpayers.

So let’s revisit the areas the key things to remember when preparing your tax return.

On the ATO’s radar

Genuine work-related expenses are generally deductible under tax law, but those coming under increased scrutiny this year are expense claims relating to:

Ÿ          vehicles – including those for transporting bulky equipment;

Ÿ          deductions for travel, internet and mobile phones, and

Ÿ          self-education.

Common claim mistakes

The ATO has also highlighted the following trouble zones for work-related expenses claims:

Ÿ           making claims for home office, mobile phone and computer expenses without any evidence supporting how the claims were apportioned between private expenses and work-related expenses;

Ÿ           incorrectly claiming travel between home and work as a work-related expense; and

        Ÿ receiving a travel allowance and claiming the full amount without actually having spent that much. 

Golden rules of claims

To help you make sure you are claiming to what you are entitled, here are the ATO’s three golden rules:

  1. You have to have spent the money yourself and can’t have been reimbursed by your employer.
  2. The claim must be related directly to earning your income.
  3. You need a record to prove a claim.

 Whilst you don’t need to show receipts for a standard claim up to $300, you must be able to show how you estimated the claim for deduction if asked by the ATO.

The ATO will also continue to review excessive claims for work-related expenses, and will contact employers to verify what it considers to be any “unusual” claims.

Here is an example of what cannot be claimed and the penalties for incorrect and false claims.

False claims – car, laundry and self-education

A labourer claimed falsely for a number of deductions, including for his car, self-education, clothing and laundry work-related expenses of over $10,000 over two years. He was charged with three counts of recklessly making false or misleading statements and had to pay penalties and fines. He was unable to provide any receipts or records, and when the ATO spoke with his employer they confirmed he was not required to use his own car at work, he did not have any work-related study, and that the employer supplied and paid for his required work-related clothing and his laundry costs.

We’re here to help

Avoid any trickery and talk to us if you’re uncertain about any of your potential claims, or which records we need to process your return.

We’re here to make sure you get a fair and accurate tax assessment.

Speak to us to ensure that you start 2018 on the right foot.

Ledger Rutledge & Walker Pty Ltd © 2016

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