Source: Yahoo Finance
The Australian Taxation Office has warned taxpayers to avoid three big mistakes regularly spotted in early tax returns filed in the past fortnight.
First of July this year broke an all-time record, with the ATO receiving 740,000 tax returns.
“This is up from just over 100,000 online lodgements across our channels on 1 July 2019,” said ATO assistant commissioner Karen Foat.
In just two weeks, 1.7 million lodgements have already been received.
“More than $1 billion has hit around 457,000 taxpayers bank accounts. Most returns that are lodged electronically are processed within two weeks so refunds for the first returns lodged will continue to be issued into the first half of next week.”
But the tax office has seen some common errors in these early lodgements, which potentially means no or delayed refunds for those Australians.
“While we’re pleased that many early lodgers are getting it right, there are some trends in the issues we’ve been seeing,” said Foat.
“One thing we don’t want to see is a record-breaking number of easily avoidable errors. These errors slow down returns or might lead to an unexpected debt down the track.”
Here are the three frequently seen errors, according to the ATO:
Tax return mistake: Forgetting income
The ATO has confirmed that 20 per cent of the early lodgers – a stunning 340,000 people – will not receive their refunds in the first batch paid out because of this error.
Items like job income, bank interest and health insurance numbers are often electronically sent to the ATO and pre-filled – but plenty of other sources of income have to be manually entered in.
“We are asking taxpayers to add any amounts that aren’t automatically included to your return. This includes cash wages, foreign sourced income, or even gains from cryptocurrency,” Foat said.
“Leaving out income can delay your return, particularly when we receive those income details from third parties whilst we are processing your return.”
Even the auto-filled income data, which may not even be ready yet, should be sanity-checked by the taxpayer before lodgment.
“For most people this information is ready by the end of July. If you’re lodging early, it’s crucial you check this information is there and manually add it if it’s not.”
Tax return mistake: Claiming multiple work-from-home methods
With the coronavirus pandemic this year, millions more Australians are claiming work-from-home expenses – and using the Covid-19 shortcut hourly rate method.
But the tax office has seen double-dipping in some early lodgements.
“It’s important to remember that if you’re claiming under the working from home shortcut method for 1 March–30 June 2020, you can’t claim any other expenses for working from home for that period,” said Foat.
“If you want to specifically claim the depreciation of big-ticket items like laptops or desks, you can use one of the existing methods, but you can’t double-dip and claim under the shortcut method as well.”
If you avoid using the shortcut, the traditional methods can be complex.
“If you want to claim under one of the existing methods, it’s really important that you either work through the detailed guidance on our website or talk to your tax agent because it is complicated and it’s an area that we see a lot of people making mistakes.”
Tax return mistake: Not reducing costs
Many taxpayers have claimed extra expenses because of the Covid-19 lockdown – such as remote work costs – but not reduced claims where costs have gone down for the same reason.
“We know that more people have been working from home, working reduced hours or unfortunately not working at all,” Foat said.
“So, if you aren’t travelling for work, you can’t claim travel expenses. If you aren’t wearing your work uniform, you can’t claim laundry expenses.”
Accountants Daily 17 July 2020
ATO records ‘biggest 1 July ever’ with 640% spike
Over 1.7 million Australians have now lodged their tax returns in the first two weeks of the new financial year, leading the ATO to issue a cautionary note on trending mistakes with early lodgements.
The ATO has now seen its “biggest 1 July ever”, with over 740,000 online lodgements on the day, up from just 100,000 lodgements on 1 July 2019.
The spike in lodgements, which included income tax returns, early release of super and JobKeeper applications, likely contributed to the ATO’s online systems crashing on the first day of the new financial year.
The first two weeks of tax time has now seen 1.7 million individual tax returns lodged, a 12 per cent increase on the same period last year.
The average refund amount this year stands at $2,365.
“More than $1 billion will have hit 457,000 taxpayers’ bank accounts,” said ATO assistant commissioner Karen Foat.
“Most returns that are lodged electronically are processed within two weeks, so refunds for the first returns lodged will continue to be issued into the first half of next week.”
The surge in early lodgements this year builds on top of last year’s spike when taxpayers sought to secure their low and middle-income tax offset of up to $1,080.
Tax experts had anticipated another early rush this year as taxpayers looked for a cash injection through their refunds amid the COVID-19 crisis, with the Australian Bureau of Statistics now reporting that 992,300 Australians are now formally unemployed.
However, the ATO has urged early lodgers to take care in preparing their returns, with early analysis revealing three trending mistakes.
The first issue includes claiming multiple working-from-home methods for the same period, with some taxpayers accidentally or deliberately confusing between the ATO’s recently introduced 80 cents shortcut method and its standard 52 cents fixed-rate and actual cost method.
“It’s important to remember that if you’re claiming under the working-from-home shortcut method for 1 March to 30 June 2020, you can’t claim any other expenses for working from home for that period,” Ms Foat said.
“If you want to specifically claim the depreciation of big-ticket items like laptops or desks, you can use one of the existing methods, but you can’t double-dip and claim under the shortcut method as well.
“We’ve already seen a number of people calling to advise that they have made a mistake in their working-from-home claims and seeking to amend their returns.”
The second issue the ATO has noticed so far is where taxpayers simply copy and paste their deductions from the year before, failing to account for a reduction in claims due to COVID-19.
“One concerning trend we’re seeing is people increasing deductions where they’ve spent more, like working from home, but forgetting to reduce claims in areas they have cut spending,” Ms Foat said.
“We know that more people have been working from home, working reduced hours or, unfortunately, not working at all. So, if you aren’t travelling for work, you can’t claim travel expenses. If you aren’t wearing your work uniform, you can’t claim laundry expenses.”
The final issue that the ATO has noticed with early lodgements is the failure to report all income, with prefill information unlikely to be ready so early into the new financial year.
“Unfortunately, we can confirm that approximately one in five people who lodged early won’t be getting their refunds in the first batches out because they didn’t take the time to include this income,” Ms Foat said.
“While we try to include as much as possible, we are asking taxpayers to add any amounts that aren’t automatically included to your return. This includes cash wages, foreign-sourced income, or even gains from cryptocurrency.
“If you’re lodging early, it’s crucial you check this information is there and manually add it if it’s not.”
This summary contains the latest information compiled from the Australian and State Governments ad is to be treated as a guide only and subject to change.
Please contact us or visit our website if we can be of further assistance – especially in relation to getting your tax returns and or other financial statements up to speed for loans etc.
Australian Government latest announcements and assistance
The Australian Government’s $130 billion JobKeeper package offers a subsidy, up to $1500 per fortnight for each employee, to eligible businesses to keep paying their staff. Employers and sole traders can register their interest in this program with the Australian Tax Office.
The Australian Government has developed an app that will keep the public up to date on all Australian Government announcements. The Australian Government’s Coronavirus Australia app is available from the Apple Store and Google Play. You can also join their WhatsApp Channel.
The Australian Government has also announced a moratorium for evictions and the launch of a Jobs Hub to support businesses and those Australians looking for work.
Access the Australian Government’s website to see the latest COVID-19 news, updates and advice from Government. The website contains information such as, but not limited to:
· key updates
· health and prevention
· receiving financial support – Australian Government Economic Response to COVID-19
· information for businesses, employees and jobseekers
· help from other Government agencies.
The Australian Government has set up a team of dedicated customer representatives to explain the Australian Government assistance available to business. Get in touch with their Coronavirus business support service across Australia, seven days a week, between 7am and 9pm:
· over the phone – 13 28 46
· live chat
Australian Government Support for Small Businesses and Industry – The Australian Government is supporting Australian businesses to manage cash flow challenges and retain employees.
· Boosting cash flow for employers – Provides up to $100,000 back to small and medium-sized businesses, with a minimum payment of $20,000 for eligible businesses. The payment istaxfree.
· Increased and accelerated income support payments for sole traders and employees – This link includes examples and scenarios relating to sole traders and recently retrenched employees.
- Temporary relief for financially distressed businesses – The Government is temporarily increasing the threshold at which creditors can issues a statutory demand.
- Support for immediate cash flow needs for SMEs – Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50% to support short-term loans.
- Supporting individuals and households – The Australian Government is providing financial assistance which includes income support, payments to households, temporary early release of superannuation.
- Early access to superannuation – Sole traders or casual workers with an income or hours reduced by 20% or more, access up to $10,000 of their superannuation tax-free.
- Rural Financial Counselling Service – Rural small businesses impacted by COVID19 can contact rural financial counsellors the following areas:
- Fair Work Australia – Workplace Obligations and Entitlements – Help and advice for employers and employees with entitlements during this time.
- Centrelink – Social security payments and services for Australians.
- Australian Taxation Office – For enquires relating to income tax.
- Fair Work Ombudsman – Provides education, assistance, advice and guidance to employers, employees, outworkers, outworker entities and organisations.
Queensland Government Industry Recovery Package
Access the Business Queensland website to see the latest COVID-19 news, updates and advice from the Queensland Government to support small business and industry. The Queensland Government’s COVID-19 economic relief package contains a range of initiatives.
Queensland Government support for small business and industry includes, but is not limited to:
· Payroll tax relief package – Includes a range of payroll tax relief measures including refunds of payroll tax and payroll tax holiday and deferrals. A portal has been established on the Business Queensland website for businesses to apply for payroll tax relief.
· Small and medium business power bill relief – Small and medium businesses may be eligible for $500 rebate off their energy bill.
· Rent relief – Six months relief for businesses renting government premises.
· Rental Grant for Households impacted by the COVID 19 pandemic.
· Liquor licensing – The economic relief package includes the waiving of 2020–21 liquor licencing fees.
· QRIDA Jobs Support Loans – (also referred to as the COVID-19 Jobs Support Loans) For Queensland businesses and non-profit organisations financially affected by COVID-19. Eligible business types include sole traders, partnerships, private and public companies, and trusts.
· Business mentoring assistance – Mentoring for Growth – This program has mentors ready to connect with impacted small businesses and may be able to provide tailored support including financial mentoring and business planning.
· Financial resilience workshops – Delivered online by TAFE Queensland, workshops will provide you with practical tools and skills to build business resilience. You will also have an opportunity to connect and network with other small businesses facing similar issues.
· Market diversification and resilience grants – To help develop alternative markets for food and fishing exporters and critical supply chain partners.
· Waivers of some registration and licencing fees for inbound tour operators, commercial activity agreements and permits, and variations to liquor licenses.
· Supply chain issues – The Queensland Government is committed to assisting Queensland manufacturers and businesses that are currently impacted by the ongoing coronavirus situation. If you are finding it difficult to obtain vital materials and supplies to remain open, please access the link and complete your details.
· The Worker Transition Scheme – For workers who may find themselves without work.
Please note: If you have not already, businesses are invited to complete an online Business Impact Evaluation so the Queensland Government can capture the actual impact to small business at this point of time.
Also, contact your Local Government Authority for the latest grants and support in your region.
Other useful information that may be of assistance to you
· Australian Banking Association – Small business relief, deferral of loans
· Chamber of Commerce and Industry Queensland – Sign up for their Business Essentials subscription by 31 April 2020 and pay nothing for 12 months.
· Facebook Grants
· For Education and Schools
· General State Government updates
· Queensland Health information.
Additional wellbeing and support information
· Queensland Mental Health Commission (resources to help you stay mentally and physically healthy and well)
· Emergency Relief Program search (Queensland Government)
· Salvation Army (Disasters and emergencies support) – phone 1300 662 217
· Lifeline (Mental health and wellbeing) – phone 13 11 14
· Beyondblue (Mental health and wellbeing) – phone 1300 224 636
· Headspace (Youth mental health and wellbeing) – phone 1800 650 890.
· Care Army (Volunteer to help older people living in the community)
We hope this has been of assistance.
Is the person doing your tax fake?
Recent research conducted suggests a very high level of trust in the tax profession. But is the person or company doing your tax a real agent or a fake?
There seems to be a lot of tax scams out there: phishing, SMS & phone frauds, identity theft… But one thing we, as tax agents, continually warn the public about is the fake agent.
As registered tax agents, we are trusted advisors to our clients. Aussie taxpayers come to us for guidance and peace of mind. No matter how little they hope to pay in taxes, they should rest assured that we are reducing their tax liability (and getting them the best refund) in accordance with the law.
Unfortunately, it’s not always the case
In a case 2 months ago (Dec 2019) in Mt Druitt NSW, Mr Benjamin Cox pretended to be a tax agent to more than 1,000 people, charging $100 for his services and using their myGov login details to submit income tax returns with highly inflated and illegal claims on their behalf. He then stole their refunds by having them directed to his personal account.
Cox received a two and a half year prison sentence and had to pay back over $50,000 in stolen refunds.
Ian Klug, (Chair of the Tax Practitioners Board) states ‘make sure you are using a registered tax practitioner. They are required to meet industry standards and are covered by professional indemnity insurance, providing greater peace of mind to their clients’.
While we strive to serve our clients by helping them pay the lowest tax liability, and while we may want to “stick it to the ATO” sometimes, we also must follow Australian Tax Law. In the long run, not doing your due diligence will often lead to steep ATO penalties.
Here’s how to check:
Warning signed that your tax agent is fake.
- They are not on the Tax Agent Register
- They offer to do your return on myGov (like Mr Cox above)
- They promise an obviously inflated tax refund.
- They don’t sign or eSign your return.
- You’re asked to sign a return that is incomplete.
- They don’t provide full details of their fees or your expected refund.
Stephen Burns, CEO Accountants Direct
For more details or to get help with your tax contact us today.