As the end of financial year approaches, the ATO is once again taking the magnifying glass to our financial affairs, to ensure we’re all paying what we should. With new technology making it easier for the ATO to check data on tax returns against details from banks, employers and government agencies, you need to meet your tax obligations so you don’t get stuck paying penalties.
Check your work-related expenses
This year, the $19.5 billion claimed in work-related expenses each year are top of the ATO hit list.1 New systems can identify claims that seem too high, relative to people with similar occupations and incomes – so make sure you’re reporting your expenses accurately. You need to pay particular attention to travel costs and the use of computers, phones and other electronic devices for work purposes.
Report rental property deductions correctly
The ATO is also looking out for excessive deductions being claimed on holiday homes. Remember that you can only claim your deduction for the periods when your property is actually rented out. When renting out to friends or family at ‘mates rates’, you can only claim on the amount of income earned – not on the market value. If your rental property is jointly owned with your spouse, you can only claim half the expenses – and you’ll have to declare half the income.
Get your GST up to date
GST registration is a key target area this year. So if you’re still registered for GST but are no longer carrying on a business, you’ll need to have it cancelled. If you don’t cancel within 21 days of closing your business, the ATO does it for you – but you may have to pay a penalty.2 And if you do have a GST-eligible business, it’s worth checking that you’re complying with your tax obligations and receiving the correct refunds. Visit the ATO website for more information.
Make your SMSF tax-compliant
With more monitoring of self-managed super funds, check all details are accurate in your annual return. Don’t forget to lodge your return before the deadline which is generally 28 February after the financial year. Failure to lodge your return on time means you’ll risk not being able to receive rollovers into your fund. The ATO is cracking down on the illegal early release of super and incorrect calculation of exempt pension income, so make sure you understand and comply with your income tax obligations.
Hold on to your assets
The ATO will be keeping an eye on baby boomers who are passing on their assets to their children to avoid paying Capital Gains Tax. They are especially looking out for assets recorded at an artificially inflated price, which may be sold off years later without paying CGT. So if you’re thinking about how to save on tax by passing on your wealth to your children, you might want to consider other options.
Avoid attention-drawing behaviour
The ATO has published a list of tax issues that are likely to draw their attention so you can get your tax reporting right. This means avoiding certain suspicious behaviours, including:
- Low transparency about your tax affairs.
- Large one-off or unusual transactions.
- A lifestyle not supported by your after-tax income.
- Treating private assets as business assets.
- Using your business assets for private use.
Find out more
Everyone’s financial situation is different. If you’re not sure how to fulfil your tax obligations, it’s best to get professional advice tailored to your circumstance. Please speak with your financial adviser or call us.