This month’s column draws your attention to a number of issues that may be relevant for you at this time of the year when your mind turns to getting your information ready for tax time.
There are a number of changes this year that have implications for the preparation of your personal income tax return. These changes include income from JobKeeper or JobSeeker payments, termination or redundancy payments and deductions for work related expenses such as home office expenses, car expenses, uniform/protective clothing claims, changes to phone and WiFi usage, depreciation deductions and claims for super contributions using the catchup-up opportunity etc.
Whilst some of these issues such as making superannuation contributions and claiming home office expenses have been covered in earlier editions of my Finance columns from February 2020 through to June 2020, you may find preparing your own tax return this year more challenging than in prior years. Furthermore, the ATO has warned of increased audit activity particularly in the areas of claims for concessional super contributions and work related expenses, given the significant impact of COVID-19 on employment and working from home.
It may therefore be an appropriate time to consider using the services of a registered tax agent to prepare and lodge your 2020 income tax return and relieve you of the challenge of coping with these changes. A further benefit of using a tax agent is that you may delay lodgment of your return as late as 15th May 2021. If you expect to have a tax liability and are struggling financially, payment can be delayed until your assessment issues or even later if your tax agent negotiates a payment plan for you. You should of course engage a tax agent’s services prior to 31st October 2020 to take advantage of the agent’s later lodgment date.
Accessing your Income Statement or Payment Summary
If your employer is reporting payroll information each payday using Single Touch Payroll (STP), they are no longer required to give you a payment summary. You will instead receive an Income Statement which you can access through the ATO online services via myGov once it has been marked as ‘Tax ready’. Most employers with 19 or more employees have until 14th July 2020 to finalise their payroll data whilst those with less than 19 employees have until 31st July. The tax office will send a notification to your myGov inbox when all of your income statements are ‘Tax ready’.
If you have earned interest on bank accounts or investments or have shares that are paying dividends or received distributions from trusts you should delay lodging your tax return until all information needed to complete your tax return available through the ATO Online services has been accessed. Likewise if you are using the services of a tax agent, they also will not be able to complete your tax return until all pre-filling information is available from their software or Online services for agents.
Although you may be eager to lodge your tax return or have it completed and lodged by your tax agent, it may cause you further inconvenience and cost if subsequently additional information becomes available necessitating the preparation and lodgment of an amended return.
COVID-19 Income Support Reporting
a) JobKeeper Payments
If you are an employee and your employer received JobKeeper payments for you as an eligible employee, the reimbursements received by your employer are included in your gross salary and reported at Item 1 in your tax return.
If you are self-employed and operating as a sole trader, eligible JobKeeper payments you have received will be included in your Business Income at Item P8 of your individual tax return.
b) JobSeeker Payments
If you were in receipt of JobSeeker payments this is assessable income and will be included in the information available from the ATO Online services through myGov and must be included in your tax return at Item 5 – Australian Government Allowances and Payments.
c) Cash Flow Boost
If you are a sole trader with employees and were fortunate enough to be eligible for the cash flow boost, these payments are classified as non-assessable non-exempt income and are not included in your tax return. Yes, that is true!
d) More Good News
If you missed out on buying depreciable assets over $30,000 and less than $150,000 by 30 June 2020, the good news is that the Govt. has extended this generous allowance until 31st December 2020.
e) Not so Good News
The ATO has increased its focus on the tax gap of $8.4 billion between what individuals not in business are paying compared with what they should be paying if they fully complied with the tax laws. Yes that is correct!
As a result the ATO has implemented a number of key initiatives in order to reduce the estimated tax gap for this taxpayer group, many of whom prepare and lodge their own tax returns.
These include amongst others:
- increasing the quantity and quality of the data the ATO collects (particularly through the ‘I’ return).
- helping taxpayers and their tax agents correctly report income and deductions up front, using prompter messages, emails and letters to alert them early where amounts reported on the return are unusual compared to similar taxpayers
- taking firmer action to address non-compliance among higher-risk taxpayers and agents including additional audits in areas driving the tax gap.
The content of this article is not intended to be used as professional advice and should not be used as such.
Brian Spurrell FCPA, CTA, Registered Tax Agent, is Director of Personalised Taxation & Accounting Services Pty Ltd.
PO Box 143 Warrandyte 3113.
Mobile: 0412 011 946,