As we head out of another financial year and into another tax season, now is a critical
opportunity to switch from a reactive to proactive posture when it comes to navigating your and your business’ operations and tax affairs.
Tax and financial planning is focused on establishing a strategy for the year(s) ahead not only ensures you minimise your liabilities and maximise your profits, but also ensure that your operation and cashflow are prepared for what may come.
Work-Related Expenses
Only claim what you are entitled to claim.
Your friends might gush about how they claimed the kitchen sink and worked their way to a massive refund, but it an ever-evolving world of information sharing and data collection, catching tax-cheats is becoming an easier and easier task for tax agencies across the world.
If they get caught and it is determined that they consciously misrepresented their taxes in order to gain a benefit, they could be on the hook for fines, additional penalty tax, and can even land themselves in court if the breaches were significant enough.
It will save you both time and money just to get it right the first time.
Some of the common errors we see are:
1. Working-from-Home Expenses (‘WFH’)
When COVID landed on our shores, the ATO expanded the WFH deductions scheme to provide some tax relief for those of us stuck working from home.
You may have applied the COVID Rate or Shortcut Rate in your last few returns; These are now gone and using them in FY24 could lead you to claiming more than you are allowed to.
2. Costs of Tools and Equipment
Whether it be a tradies jigsaw or an office worker’s laptop, it is highly unlikely that we use our equipment for just work.
Claiming 100% of these purchases may seem fine, you’ve always done it, but with these items now being under the microscope, it’s time to start being pragmatic, and sticking to the book as to ensure you don’t draw the ire of one of the most heavy-handed regulatory bodies in Australia.
The team at Blackwattle get you; Nobody has time to keep a logbook over their laptop usage, but staying cognisant of how much you use your tools for work or play helps ensure that you don’t end up receiving an angry ATO letter over the 10% of your Macbook that you overclaimed.
Keep in mind that any equipment purchased for more than $300 needs to be depreciated and claimed over a number of years.
Claiming your flash new home office or tool chest worth $10,000 in one hit will land you in hot water extremely quickly.
3. Travelling for Work
Most of us commute to work. It’s tedious, it’s expensive, it’s also not deductible.
Travelling for work is one of the more common queries we receive, and it pains us to say that you can only claim the travel between work and other work.
This means direct travel between jobs, i.e. skipping the trip home to get changed, travelling from your office to clients and vice versa, and travelling from your office to other offices.
A good accountant will be able to tell you exactly what you are entitled to claim, so get in touch with our team and save the headache.
Rental Deductions
Inflation and the interest rate hike response has led to a bit of a double hit to any leveraged rental property investors.
This, in conjunction with rental yields remaining relatively flat, has led to reduced profits / increased losses, which might push people to claiming larger deductions on their properties than they should.
We have received countless letters from the ATO requesting evidence of rental deductions; This means providing statements, receipts, and invoices for perfectly valid claims.
So where does that leave you if you were to claim more than your evidence allows you to?
It’s always tempting to fudge your numbers a little bit; An extra $50 of water bills, another $100 of gardening, but saving the $40 in tax is not worth becoming a convicted fraud over.
Check your supporting documents before you claim anything, because there may be a time where the ATO will want to have a look too.
If your math is off, they won’t think twice about clawing back the tax you saved, plus an extra grand or two for their troubles.
Include all of your income
We touched on it above, but the ATO has access to a shocking amount of your financial information.
You may have seen this in the form of your prefilling information.
Wages, bank interest, healthcover policies, Superannuation, managed fund distributions, and more, so it really isn’t a smart choice to start leaving out or even removing prefilled items from your return.
Did you provide your TFN when you opened that share trading or crypto account?
The ATO can see what you’ve traded and how much the trade was worth.
Sell your holiday home and want to skip the CGT by not reporting it?
The ATO has that sale too.
You might’ve received a few dollars from some managed fund you bought into on a whim and getting the reports together just isn’t worth the time.
Once the fund discloses your distribution to the ATO, data matching will catch you before you can even think twice about your decision.
Put the effort it, report all your income, and avoid the ATO investigation that could drag on for weeks and weeks, and leave you owing more than if you just did it right the first time
It may seem like you’re set up to fail; The ATO has all this information and still expects you to put in the legwork.
Fortunately, good accountants take this load on for you, turning the dread of tax time into a couple of emails to our team members, knowing you’ll be taken care of.
Schedule a FREE 30-minute consultation today to discover how we can help you make strategic decisions and streamline your business operations.
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Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature. You should seek the assistance of a professional opinion for any legal and tax issues related to your personal circumstances.
