Tax Return Mistakes

Some taxpayers assume that lodging an annual tax return is easy.

Cheap talk at the pub, or at a party, or from a sales assistant at a computer store, can lead to costly errors.

Examples of items that you cannot automatically claim are:-

$300 for work-related expenses
$150 for laundry
5,000 kilometres for cars
credit card statements as evidence
home to work travel
plain clothes for work
grooming
holidays connected to a conference
gym memberships
pay TV subscriptions

We spend a great deal of effort to remain up to date and aware of all rules, but also alert to opportunities as the rules become more complex every day.

By all means, ask about these expenses if you think they may be relevant and you pay them.

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SMSF advice appetite strong, says ASIC

A new ASIC report has highlighted demand for further advice on the specifics of SMSFs among the Australian population, particularly among those who have a financial planner.

The report, titled Financial advice: What consumers really think, found that 25 per cent of consumers who had recently received financial advice wanted more guidance around SMSFs.

Around 50 per cent of financial advice customers also wanted advice on retirement income planning, while around 45 per cent wanted guidance on growing their superannuation, highlighting the potential value for accountants in establishing a referral partnership with advice businesses to tap into this demand.

Within this group of consumers who had seen a financial adviser, 45 per cent chose their adviser based on their level of experience, while about 43 per cent chose them based on their ability to understand the consumer’s personal goals.

An additional 43 per cent selected their adviser as they were someone the consumer was comfortable talking to.

However, demand for SMSF advice was not limited to those who had seen a financial planner, with 15 per cent of the broader consumer population also indicating a desire for guidance around self-managed funds.

This broader group selected their adviser based primarily on their reputation (38 per cent), their experience (41 per cent) and their ability to talk to the consumer in a way they could understand (36 per cent).

Across all respondent groups, the majority indicated that the adviser would need at least five to 10 years in the industry to be trustworthy, the report said.

Sarah Kendell
28 August 2019
accountantsdaily.com.au

Taxpayers confused by Scott Morrison’s $1,080 tax refund

The excitement over the tax sweetener is quickly turning to confusion, as many Aussies wait for a handout that will never arrive.

The refund is actually a tax offset, which is calculated when you lodge your income tax return

The tax offset reduces your overall tax bill, so you might end up having to pay less if you receive a tax bill.

The low and middle income tax offset is a non-refundable offset, which means any unused offset amount itself cannot be refunded or reduce the Medicare Levy.

Taxpayers with a taxable income that does not exceed $37,000 will receive a low and middle income tax offset up to $255. People with a taxable income that exceeds $37,000, but is not more than $48,000 will receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080.

Quick Guide

Taxable Income Rebate

0 to $37,000 255

37,000 to 48,000 255 + 7.5%

48,000 to 90,000 1,080

90,000 to 126,000 1,080 – 3%

126,000 plus 0

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Australia at a glance

The following link takes you to a site that sets it all out in black and white, though a strong coffee will help!

One great source of data about Australia. Become better acquainted with the country we love.

An up-to-date snapshot of Australia's vital statistics.

Please click on the following link to see all this interesting information. The areas covered are:

Overview
Markets
GDP
Labour
Prices
Money
Trade
Government
Business
Consumer
Housing
Taxes
Climate

Access all this data here.

10 top global corporations since 1998

A very interesting, graphical, summary of the monsters of our global economy. Fascinating stuff!!

The following video is a really great representation of how the top 10 global corporations have changed since 1998.

Catch-up Contributions

July 2019 sees the introduction of the new catch-up contribution rules, which allow people with less than $500,000 in super to make extra concessional contributions up to their previously unused $25,000 annual cap.

So, if $10,000 went into your super last financial year, this financial year you could put in $25,000 plus last year’s unused $15,000.

However, take care!

The rules only apply to unused contribution caps starting from the 2018-19 financial year.

There are many eligibility and threshold tests throughout the superannuation system.

So, obtain advice and consider regular conversations about life insurance, superannuation, retirement, etc.

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Life Insurance

Important: A major change to life insurance in many super funds.

The Federal Governments Protecting Your Super package starts on 1 July 2019 and will see an estimated three million people affected as new rules automatically switch off life insurance policies in super funds that have not received contributions in 16 months.

It’s designed to stop unwanted insurance premiums eating into retirement savings.

But a side effect is that those who need insurance but haven’t contributed recently – perhaps after taking time off work to raise children may lose that protection and be unable to get it back.

Fixing this is simple. Contact your super fund or make a (small) contribution.

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Community tip-offs trigger ATO visits

Around 700 small businesses in Western Australia are set to receive door knocks from the ATO next month after the agency received intelligence around possible black economy behaviour.

The ATO is planning to visit around 700 small businesses in Broome, Cable Beach, Derby and Kununurra, Western Australia in August as it looks to tackle black economy behaviour.

ATO assistant commissioner Peter Holt said these towns have been singled out as a result of some tell-tale signs of black economy behaviour.

“Black economy signs that we look out for are things like not being registered for GST or pay as you go withholding, lifestyle and assets far exceeding reported business income, or a lack of merchant payment facilities like EFTPOS,” Mr Holt said.

“We understand that some businesses may not have merchant payment facilities due to individual circumstances. The issue is when businesses are deliberately ‘cash only’ to avoid reporting all their income. By detecting and addressing this behaviour, we’re helping to keep things fair for honest small businesses.

“Another reason we’re heading to Broome, Cable Beach, Derby and Kununurra is because we’ve received intelligence from the community that some businesses aren’t playing by the rules, such as paying their workers cash in hand and keeping them off the books.”

Prior to the visits, local businesses and tax professionals are invited to attend a one-hour information session that will explain the purpose of the visits, what to expect if visited, and how to avoid common mistakes. Single Touch Payroll information sessions will also be offered in both locations.

The industries that are more likely to be visited by the ATO include:

Residential building construction
Building completion and installation services
Other construction services
Building cleaning, pest control and gardening services
Accommodation
Automotive repair and maintenance
Cafes, restaurants and takeaway food services
Personal care services

The latest number of towns set for a visit comes after the ATO announced it was planning to visit around 500 businesses in or around Port Macquarie and Wauchope in late July and early August.

Jotham Lian
30 July 2019
accountantsdaily.com.au

Up to 9 in 10 ‘other’ expenses adjusted as ATO reveals dodgy claims

Close to 90 per cent of claims in ‘other’ deductions were adjusted last year as the ATO reveals a number of unusual claims it disallowed, including a $58,000 wedding.

ATO assistant commissioner Karen Foat has revealed that nearly 700,000 taxpayers claimed almost $2 billion of ‘other’ expenses last year.

Accountants Daily understands that a random sample of 400 of those ‘other’ expenses claims saw adjustments made to 88 per cent of them.

Last year, the ATO revealed an $8.7 billion inpiduals tax gap, with adjustments required for 72 per cent of its random sample of 868 returns.

With ‘other’ expenses, the ATO said it saw a mix of incorrect claims from self-preparers and returns lodged by a tax agent by refrained from giving a breakdown in figures.

“For self-preparers, the errors range from honest mistakes to deliberate over-claiming. In some instances, we have seen cases where a taxpayer has been dishonest with their tax practitioner about the legitimacy of expenses incurred,” an ATO spokesperson told Accountants Daily.

$1,700 in Lego and $24,000 for the cost of raising twins

The top five most outrageous claims seen by the ATO in tax time 2018 included a taxpayer attempting to claim $1,700 for the cost of Lego kits purchased for their children throughout the year.

Another saw a taxpayer trying to claim wedding expenses of approximately $58,000, claiming this was in relation to a work related overseas conference.

“He fraudulently claimed $33,087 in his return and $25,259 in his wife’s. This taxpayer was prosecuted,” said the ATO.

One taxpayer made a claim for “the cost of raising twins” totalling $24,000, while another claimed for the “cost of raising three children”, with one taxpayer stating “new born baby expensive” when making their claim.

Many taxpayers tried to claim the purchase of a new car, in the excess of $20,000, with one taxpayer attempting to claim $3,659 for a car purchased as a gift for their mother.

“A couple of taxpayers claimed dental expenses, believing a nice smile was essential to finding a job – and was therefore deductible. It isn’t and their claims were disallowed,” said Ms Foat.

“Where people make genuine mistakes, we simply disallow the claim. But when people are deliberately making dishonest claims, particularly for large sums, we will disallow the claim and may impose a penalty.

“We want people to understand what expenses they can claim and receive every dollar they are entitled to. But making incorrect claims that are personal or private take funding away from providing essential community services, and that’s not ok.”

Jotham Lian
31 July 2019
accountantsdaily.com.au

Downsizer Super Contribution

Australians who are 65 years old or older may make a downsizer contribution into their superannuation of up to $300,000 from the proceeds of seeling their home.

The downsizer contribution can still be made even if the contributor has a total superannuation balance (TSB) greater than $1.6 million.

A few points are:-

will not affect the TSB until 30 June at the end of the financial year
can only be made for the sale of one home
not tax deductible and will be taken into account in determining eligibility of the Age Pension
there is no requirement to purchase another home
must have held an ownership interest in the home for 10 years
limited to the lesser of $300,000, or the total capital proceeds received from the sale of the interest in the home
can be both owners (i.e. $300,000 each)
within 90 days of the change of ownership.

Early planning will ensure you don’t miss the boat.

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