Common trick that makes ATO hard

With tax time fast approaching, the ATO has revealed why Aussies may be getting less this year than they expected upon their return.

With tax time fast approaching, the ATO has warned Aussies that they may be getting less this year than they expected upon their return.

The Australian tax office says a moratorium on debt collection is coming to an end as the country emerges from the Covid-19 pandemic, meaning taxpayers with outstanding bills can deduct any amount from their refunds or other credits with other agencies.

During the early days of Covid, the tax office shifted its focus from tightening debt collection to help businesses and the community.

“That’s pretty much reversed now. The ATO believes we’re going back to normal, Covid is done and dusted, that’s why it’s targeting small business tax debt,” said H&R Block, director of tax communications, Mark Chapman.

Mr Chapman said debt collection would be a “big priority area” for small businesses.

“We understand that many people – especially small businesses – have been hit hard by Covid and may now have tax debts,” ATO Deputy Commissioner Vivek Chaudhary said in a statement.

“Our message is – don’t bury your head in the sand – even if you can’t pay the full amount owed right away, get in touch with us or your registered tax professional to discuss and we’ll work with you to find an appropriate payment arrangement. .”

Mr Chaudhary said it was possible for the ATO to arrange support and assistance, but only if the taxpayers or their representatives “talk to us and heed our calls”.

“We can’t help taxpayers who don’t work with us,” he said.

Debt collection

If taxpayers don’t answer the phone, the ATO has warned against “tougher actions”.

Those include garnishments, recovery of driver fines, disclosure of tax debts in excess of $100,000, and legal actions, including subpoenas, petitions from creditors, winding up and insolvency proceedings.

“Our debt collection activities prioritize taxpayers who represent higher risks and refuse to participate,” said Mr Chaudhary.

“Therefore, we will initially focus on taxpayers with higher debts, before including taxpayers with all other debts. Taxpayers with a pension guarantee can receive priority regardless of their debt value. After all, the Old Age Guarantee is a claim on employees.”

Indebted taxpayers are getting information letters — nearly 30,000 so far regarding corporate tax liability disclosures and more than 52,000 about the use of driver penalties.

The ATO says it has already issued nearly 300 notices of intent to release notices and has begun disclosing some of these to credit reporting agencies Equifax and Creditor Watch.

As for companies with outstanding obligations, the ATO currently issues between 30 and 40 fines on drivers per day.

“We have seen an encouraging response to our awareness campaigns, with significant levels of payments and taxpayers entering into payment plans,” said Mr Chaudhary.

“In fact, more than 20,000 taxpayers have already responded to our awareness letters by making payments or entering into payment plans.”

Who is ATO targeting?

Meanwhile, the ATO has revealed the other areas it will focus on this year, including a particular focus on “double dip” claims for work-related costs.

Other priorities include record keeping, rental income and deductions, and capital gains from crypto assets, real estate and stocks.

For 2021, nearly 10 million individual tax refunds totaling $28.6 billion were granted, with an average refund of approximately $2900.

“There are no surprises in the list, but it really is a warning to taxpayers, especially when it comes to record keeping,” said Mr Chapman.

“It is essential that you keep all your supporting documents to back up your deductions – the invoice, receipt, bank statement – it is essential that you have these before claiming a deduction as the ATO can ask to see it, and if you can’ If you don’t produce it, the deduction may be denied.”

Mr Chapman said the ATO was “not necessarily” carrying out more checks than usual, but “they are publicizing the fact that they are doing them on a larger scale”.

“There is no excuse for taxpayers not to be aware of this,” he said.

Double dipping

In 2021, approximately 8.4 million Australians claimed nearly $19.8 billion in work-related costs.

The ATO urges people to follow the rules for claiming, which depend on the type of job, individual circumstances and whether there are the required documents to support the claim.

“While some people make real mistakes, we see people trying to gain an unfair advantage by claiming incorrect or false expenses,” said Deputy Commissioner Tim Loh.

“A mistake we often see with tax returns is that people declare expenses twice. You wouldn’t double your chip, so don’t double your deduction.”

He added: “Remember that we use advanced data analytics to check for inaccurate information and you risk being monitored or penalized for intentionally providing incorrect information.”

This also applies to declaring costs that the taxpayer has already reimbursed by his employer.

“If your boss reimbursed you for dry cleaning for your uniform, but you claim laundry deductions on your tax return, you’re picking your neighbors’ pockets,” said Mr. Loh.

Working from home

During Covid last year, one in three Australians claimed that working from home incurred expenses on their tax returns and the ATO expects the trend to continue.

But it says a common mistake is for people to use the shortcut method of working from home to claim their work-from-home expenses and then double-dipping, claiming additional amounts in their expense allowance, such as their cell phone and internet bills, as well as the decline in equipment value. and furniture.

The abbreviated method of claiming expenses is all-inclusive.

Other options for calculating the deduction for working from home are the fixed rate and subsequent calculation methods.

Taxpayers can use the ATO Home Office Cost Calculator to determine which method produces the best results.

“While the traditional methods require receipts, paperwork and other recording, the shortcut method only requires a record of hours worked — journal entries or timesheets will suffice,” said Mr. Loh.

When declaring work-at-home costs via the shortcut method, the amount under the question “other work-related costs” in the tax return must be included with “Covid hourly rate” in the description field.

In later years, if a method other than the shortcut method is used and you want to claim depreciation for an expensive purchase such as a laptop, you must keep proper records for that item.

“It’s easy to get your tax returns done right if you have the right information,” said Mr. Loh.

“Make sure you have your records before you file your tax return and keep your records after you file them in case we have any questions. The easiest way to keep track of your records is with the ATO app. Even if you choose to file your tax return with a registered tax agent, it is still your responsibility to ensure that the agent has all the correct details.”

car expenses

Likewise, work-related car costs are another area where people often take the double plunge.

One of the most common mistakes among the nearly three million people claiming work-related auto costs in 2021 was that people used the penny-per-mile method to file their claim, then double-dipping by declaring costs separately, such as fuel, car insurance and registration.

The rate per kilometer is all-inclusive and covers depreciation, registration, insurance, maintenance, repairs and fuel costs.

The ATO says it will also take a closer look at the claims calculated using the logbook method, to ensure they reflect the circumstances of people emerging from the pandemic.

“You should choose your preferred method when calculating car costs, the penny per mile or the logbook method,” said Mr. Loh. “Just because there’s a dip in the road doesn’t mean you can double your car costs.”

Rental income

If you own a rental property, the ATO will notify you to ensure that you include on your tax return any income you received from your rental, including short-term rental arrangements, insurance payments, and bonds that you withhold.

“We know that many rental property owners use a registered tax agent to assist with their tax matters,” said Mr. Loh.

“I encourage you to keep good records, as all rental income and deductions must be entered manually, you can ask your registered tax agent for help. If we notice a discrepancy, it may delay processing your refund as we may contact you or your registered tax agent to correct your return. We may also request supporting documentation for any claim you make following your notice of review issues.”

crypto profit

Capital gains, particularly from crypto investors, but also from anyone selling assets such as real estate or stocks, remain the focus of the ATO.

If you have an asset this fiscal year, including non-fungible tokens (NFTs), you must calculate a capital gain or loss and include it on your tax return.

In general, a capital gain or loss is the difference between what an asset has cost you and what you receive when you sell it.

“Crypto is a popular asset type and we expect to see more capital gains or losses in tax returns this year,” said Mr. Loh.

“Remember that you cannot offset your crypto losses against your salary and wages. Through our data collection processes, we know that many Aussies buy, sell or exchange digital coins and assets, so it’s important for people to understand what this means for their tax liabilities.”

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