Every financial year ends are busy ones for all financial service and accounting businesses. As much as we try to avoid it, there always seems to be last-minute transactions to process and tax planning advice required. Throw in some nationwide Covid lockdowns – and it takes the last-minute rush to the next level.
A lot of people are expecting some extra dollars back in their 2021 tax – so we are anticipating a very busy start to the 2021 tax season. As far as tax time appointments are concerned, we are expecting many clients will continue with the virtual appointment regime that was used so successfully during the 2020 tax season.
But, overall, in the rush to get back those much anticipated tax refunds, there are three important points that every taxpayer needs to remember.
- Make Sure You Have All Your Info
A lot of people who are quick off the mark in July run the risk of making mistakes. The ATO – via the myGov portal – provides a lot of information to help people get their returns correct. This includes your work PAYG summaries, bank interest, share dividends, plus they are expanding their reach to provide information from sharing economy platforms, whether you have sold shares or property and even cryptocurrency exchanges. But early in July all this information is still being reported and collated into individual reports for each taxpayer. If you prepare your return too early, you risk the ATO contacting you later in the year to announce that your return is incomplete and require you to lodge an amended return – and often this means paying back all or part of a refund. This is where a little patience in July can save you some grief later in the year.
- Beware The ATO Targets
The ATO has “favourite” targets that it includes each year on its warning list – including a focus on rental property expenses, cash economy industries and ensuring that any capital gains from rental property and share sales are properly recorded. And this year the ATO tells us that they will be taking a special interest in what people have been doing on cryptocurrency exchanges. Other tips that may help include the following:
- Car claims. Make sure you have a current logbook. If claiming a set rate have diary records or spreadsheet of kms traveled and make sure you take into account this year any time off or work from with COVID.
- Work From Home. If making a claim you need to make sure you have diary records over a month or letters/contracts from work stating that you are working from home.
- Cross Matching Claims. The tax office will be looking closely at claims this year to see if they “make sense” across the board. For example, if you worked from home for some of the year they may question why you are claiming laundry for the whole year. This is where a tax professional will ask all the right questions about whether you wear logo uniforms and how many times a week you wash them and how many months in the year you wore them.
- Internet and Mobile Phone. If you are claiming internet and mobile phone costs for work make sure you have records and have backup of how you worked out % claimed for work.
- The Golden Rule (for tax claims)
There are many different trades and professions – and a wide range of items that taxpayers can potentially claim as a work-related expense. These things are not set in stone – the ATOs approach to claims, and the records you need to prove your claims, can change from year to year. This is where an experienced and up-to-date professional tax accountant can help ensure you don’t miss any legitimate claim, but also don’t get your claims wrong. But regardless of the potential deduction, the first thing you must ensure is that it meets three basic criteria.
- You must have paid for it – ie spent money on the item concerned – and not been reimbursed that money by your employer
- The expenses must directly relate to the earning of your employment income and must not be private in nature
- You must have a record to prove you made the expenditure (eg a tax invoice/receipt)
