We know it's a busy time of year for everyone, but you need to start getting ready for tax time – yes, it's almost upon us again.
We want to make it as easy as possible:
At the beginning of July 2018, we will be sending out our normal tax information gathering checklists to make it easier, but we thought that it would be good to highlight some key things that you need to do to prepare:
1. Start gathering and sorting your records now, (it will save you time in the long run). This may include bank statements, PAYG Withholding Summaries, Interest or Dividends received,
2. Other income such as business income or the sale of investments, such as property or shares,
3. Expenses you can claim as a business deduction or against your employment income. This may include motor vehicle expenses, union fees, gifts and donations or any other expenses directly related to you earning income.
Make sure you can show how you apportioned your expenses between business and private use also.
If you changed your record keeping software during the year, check that all your information has transferred over correctly.
The tax deductions on this year's ATO hit list
Every year the ATO makes it known what sort of deductions will be getting the eagle eye – so far, here's what we know about this upcoming financial year:
The ATO publicly flags a couple of areas it's looking at because (surprise, surprise) it's not really trying to scrounge every dollar it can from you.
It just wants to stop people from over claiming (accidentally or otherwise), and the main drivers are:
It costs the taxpayer money if people successfully claim deductions they're not entitled to.
Chasing up fraudulent claims is a time-consuming hassle, despite the ATO's fancy tech toys on hand.
So, if the ATO stops people making fraudulent claims in the first place by giving them a heads-up, then it's happy days all-round.
Here's what it's flagged for this year:
'Gig economy' incomes
The ATO will be looking closely at the incomes of so-called "gig economy" workers or those earning money from gig economy activities such as renting out a room on Airbnb.
"Individuals who choose to rent their vehicle or rooms in their homes through the sharing economy are entitled to certain deductions".
However, these expenses must relate directly to the earning of income and accurate records or receipts may be required to back up a claim. No matter how little you earn through car or room sharing, it's important to include it in your tax return.
The ATO is also on the lookout for claims made for work expenses. There's a trend to not give much proof that the claim is for a work-related activity.
Data suggests that 6.7 million Australians claimed a record $7.9 billion in work-related deductions last financial year, so it's checking if people were claiming these correctly.
In the firing line are claiming deductions for entire phone call costs, when some of these phone calls were personal, and home-office expenses.
The ATO has also said it's also keeping a special eye out for work-related clothing expenses.
"Many taxpayers do wear uniforms, protective or occupation-specific clothing and have legitimate claims. However, far too many are making mistakes such as claiming for plain clothing they bought to wear to work, like a suit or black pants".
The ATO advises that you can't claim a deduction for what's called 'conventional clothing' even if your boss tells you to wear it. The ATO said occupation-specific clothing can be chequered chef pants, while protective clothing like hi-vis safety vests and steel-capped boots can be claimed as deductions.
"There's no such thing as a standard deduction for clothing and laundry, and there's no safe level to claim a deduction where you haven't spent the money or where an expense isn't directly related to earning your income."
The ATO advised there were $8.8 billion in car-related claims during the last financial year – coming from 3.75 million people.
That's a whopping $2,347 per person.
The ATO's concerned that people are claiming private trips, trips they didn't make, or trips or car expenses that have already been paid by their employers.
What made the ATO raise an eyebrow for car-expenses claims is that 870,000 people claimed the absolute maximum amount they could for work-related travel under 5000kms.
"It's legitimate to claim for 5000 kilometres if you did actually do them as part of earning your income".
"The ATO is concerned that some taxpayers mistakenly believe that this is a 'standard' deduction they're entitled to, without needing to provide any evidence of having travelled that distance or even having undertaken any travel at all."
While you don't need to provide a log book for claims under 5000km, you need to provide some record of travelling to the places you said you did.
What's more, the ATO's data analytics unit's getting better all the time – it'll be able to match up your claim with others in your industry earning similar incomes.
Be careful, the ATO are certainly watching.
Trading names are being retired
(Source – www.ato.gov.au – 22 May 2018)
The Australian Business Register (ABR) is working with Australian Securities & Investments Commission (ASIC) in preparation for the retirement of trading names.
To continue trading under a specific name, you need to register it as a business name. After a business name is successfully registered it will appear on ASIC's business names register and the ABN Lookup.
From November, all trading names will be removed from ABN Lookup. Only registered business names will continue to be listed, so check you have registered your trading name as a business name with ASIC by then.
Changes to GST on property transactions
(Source – www.ato.gov.au – 4 May 2018)
From 1 July 2018, if you are purchasing new residential premises or potential residential land subdivisions you will have to pay the GST directly to the ATO as part of the settlement.
These changes will apply to contracts entered into on or after 1 July 2018.
The amount of GST hasn't changed, just who is required to pay the GST to the ATO has. You now pay the GST directly to the ATO instead of paying it to the developer as part of the purchase price. You won't have to register for GST to make this payment.
Property developers will need to give written notification to you when you need to withhold an amount for GST. There are no changes to the sales of existing residential properties or the sales of new or existing commercial properties.
Be sure to check this legally before a prospective purchase ends up costing you more by not complying with the new GST requirements.