With tax season fast approaching, the ATO has revealed why Australians may be getting less than they expected when they return this year.
With tax season fast approaching, the ATO has warned Australians they may get less than they expected when they return this year.
The Australian Taxation Office says a debt collection moratorium is coming to an end as the country emerges from the Covid-19 pandemic, meaning taxpayers with unpaid bills may see an amount deducted from their refunds or other credits from other agencies.
At the onset of Covid, the tax office shifted its focus from tougher debt collection to helping businesses and the community.
“It’s pretty much in reverse now, the ATO feels we’re back to normal, Covid is done and dusted off, so it’s chasing small business tax debts,” said Mark Chapman, director of tax communications at H&R Block.
Mr Chapman said debt collection would be a “big priority area” for small businesses.
“We understand that many people – especially small businesses – have been hurt by Covid and may now have tax debt,” ATO Deputy Commissioner Vivek Chaudhary said in a statement.
“Our message is – don’t put your head in the sand – even if you cannot pay the full amount due immediately, please contact us or your registered tax advisor to discuss this and we will work with you to put an appropriate procedure in place. . payment arrangement.”
Mr Chaudhary said it was possible for the ATO to arrange support and assistance, but only if the taxpayer or their representatives “talk to us and answer our calls”.
“We can’t help taxpayers who don’t engage with us,” he said.
If taxpayers don’t pick up the phone, the ATO warned of “stronger action”.
These include garnishments, recovery of directors’ penalties, disclosure of corporate tax debts over $100,000, and legal actions including summonses, creditors’ petition, liquidation and insolvency action.
“Our debt collection activities prioritize higher risk taxpayers who are unwilling to engage,” Chaudhary said.
“That’s why we will focus initially on taxpayers with higher debts before including taxpayers with all other debts. Taxpayers with debts under the retirement pension guarantee may have priority, regardless of the value of their debt. Indeed, the Superannuation Guarantee is a right due to employees.
Taxpayers in debt are receiving outreach letters – nearly 30,000 regarding the disclosure of corporate tax debts and more than 52,000 regarding the use of administrator penalty notices so far.
The ATO says it has already issued nearly 300 notices of intent to disclose and has begun disclosing some to credit reporting bureaus Equifax and Creditor Watch.
For companies with outstanding obligations, the ATO currently issues between 30 and 40 directors’ sanction notices each day.
“We have seen an encouraging response to our outreach campaigns, with a significant level of payments and taxpayers entering payment plans,” Chaudhary said.
“In fact, more than 20,000 taxpayers have already responded to our outreach letters by making payments or entering into payment plans.”
Who is ATO for?
Meanwhile, the ATO revealed the other areas it will target this year, including a particular focus on “double dip” claims for work-related expenses.
Other priorities will be record keeping, income and deductions from rental properties, and capital gains from crypto-assets, property and stocks.
Nearly 10 million individual tax refunds have been issued for 2021 totaling $28.6 billion, with an average refund of around $2,900.
“There are no surprises in the list but it is really a warning to taxpayers, especially in terms of record keeping,” Mr Chapman said.
“It is essential that you keep all your supporting documents to back up your deductions – the invoice, the receipt, the bank statement – it is essential that you have these before claiming a deduction as the ATO may ask to see it, and if you can’ if he did not produce it, the deduction could be disallowed.
Mr Chapman said the ATO was “not necessarily” doing more checks than usual, but “they are publicizing the fact that they are doing them more widely”.
“There’s really no excuse for taxpayers not knowing about this,” he said.
In 2021, around 8.4 million Australians claimed nearly $19.8 billion in work-related expenses.
The ATO urges people to follow the rules for making claims, which depend on the type of job, individual circumstances and whether or not the documents required to support the claim exist.
“While some people make real mistakes, we see people trying to gain an unfair advantage by claiming incorrect or false expenses,” Assistant Commissioner Tim Loh said.
“One mistake we often see on tax returns is people claiming expenses twice. You wouldn’t double your token, so don’t double your deductions.
He added: “Remember that we use sophisticated data analytics to monitor incorrect information and you risk being audited or penalized for deliberately providing incorrect information.”
This includes claiming all expenses for which the taxpayer has already been reimbursed by their employer.
“If your boss reimbursed your dry cleaning costs for your uniform, but you then claim laundry deductions on your tax return, well you’re picking your neighbors’ pockets,” Loh said.
Work at home
During Covid last year, one in three Australians declared working from home on their tax returns and the ATO expects the trend to continue.
But he says a common mistake is that people using the work-from-home shortcut method of claiming their work-from-home expenses and then double-dipping, claiming additional amounts on their return for expenses such as their phone bills laptops and the Internet, as well as the fall in value of equipment and furniture.
The abbreviated expense claim method is all-inclusive.
The other options for calculating homework deductions are the flat rate and actual cost methods.
Taxpayers can use the ATO’s home office expense calculator to help them determine which method will give them the best result.
“While the traditional methods require receipts, documents and other records, the abbreviated method only requires a record of hours worked – journal entries or timesheets will suffice,” Loh said.
When claiming work-from-home expenses using the short-form method, the amount should be included in the “Other work-related expenses” question on tax returns with “Covid hourly rate” in the description field.
If a method other than the abbreviated method is used in subsequent years and you wish to claim depreciation for an expensive purchase such as a laptop computer, the correct records for that item must be kept.
“Getting your tax return is simple if you have the right records,” Loh said.
“Make sure you have your records before you file your tax return and keep your records after you file, in case we have any questions. The easiest way to track your recordings is to use 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 records.
Likewise, work-related car expenses are another area where people often double down.
One of the most common mistakes among the nearly three million people who claimed work-related car expenses in 2021 was that people used the cents-per-mile method to make their claim, then doubled down on claiming car expenses separately. expenses such as fuel, car insurance and registration.
The cents per kilometer rate is all-inclusive and covers decline in value, registration, insurance, maintenance, repairs and fuel costs.
The ATO says it will also take a closer look at claims calculated using the logbook method, to ensure they reflect the situation of people coming out of the pandemic.
“You have to choose your preferred method when calculating car expenses, cents per mile or the logbook method,” Loh said. “Just because there’s a dip in the road doesn’t mean you can double your car expenses.”
If you own rental property, the ATO puts you on notice to ensure that you include all income you have received from your rental on your tax return, including short-term rental arrangements, insurance payments and the bonds you keep.
“We know that many rental property owners use a registered tax agent to help them with their tax affairs,” Loh said.
“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 assistance. If we notice any discrepancy, it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return.We may also request supporting documentation for any claims you make after your notice of valuation issues.
Capital gains, particularly from crypto investors, but also from anyone who sells an asset such as property or shares, continue to be a focus of the ATO.
If you sell any asset, including non-fungible tokens (NFTs) during this fiscal year, you will need to calculate a capital gain or loss and record it on your tax return.
Generally, a capital gain or loss is the difference between what an asset costs you and what you receive when you dispose of it.
“Crypto is a popular type of asset and we expect to see more capital gains or losses reported on tax returns this year,” Loh said.
“Remember that you cannot offset your crypto losses with your salary and wages. Through our data collection processes, we know that many Australians are buying, selling or trading coins and digital assets, so it is important that people understand what this means for their tax obligations.