We recently attended a video conference hosted by the Tax Practitioner’s Board which focused on the key areas the Australian Taxation Office would be focusing on in 2021 as part of its audit and compliance program. Whilst many of the matters outlined below are second nature to us, we thought it timely to remind everyone of the need to review their affairs as we approach the end of financial year.
Personal Tax Returns
- Motor Vehicle Expenses
With the impact of COVID meaning more people are working from home the ATO expects to see a general reduction in the amount of work-related and business use of motor vehicles. For people using the logbook method it would be appropriate to ensure you have a valid (12 week) logbook completed.
- Rental Properties
The key area of focus revolves around holiday homes and personal use and ensuring that expenses are apportioned for any private use. Please ensure when providing us with your end of year financial information you provide us with the number of days your rental property has been used personally.
- Re-imbursements and Salary Sacrifice
Where expenses you have paid have been re-imbursed by your employer or you have entered a salary sacrifice arrangement there is no ability to claim a tax deduction. This is because it is your employer who has incurred those costs on your behalf.
- Capital Gains Tax
The ATO now regularly reviews share registers and the State Land Titles Offices for the disposal of shares and properties. We remind everyone of the need to review and report both gains and losses in their personal tax returns.
Business Tax Returns
- Personal Expenses
We remind everyone of the need to separate their business and personal affairs. This can be done by ensuring separate bank accounts and credit cards are used for business and personal expenses. People also need to exercise reasonable judgement about apportionment of expenses where there is a private use element of an expense.
- Good Administration
Lodge on Time
Ensuring your reporting obligations are lodged on time and are up to date is a positive sign of compliance from the ATO. Where appropriate the use of electronic reporting software, particularly for payroll reporting (which is now compulsory), means the ATO is acutely aware of those businesses not meeting their obligations.
Keep your records clean and separate
For clients with multiple business entities ensuring expenses and income are recorded and paid in the correct entities eliminates errors and provides transparency and reliability in your information. Most ATO enquiries are a result of information provided to the ATO not matching with the records they have obtained about your business.
- Documentation is key
Filing your Invoices
Most electronic accounting systems have the ability to save and record invoices with the matching payment made through your business bank account. From a GST perspective there is a requirement to keep all invoices over $75 in order to claim the GST cost so make sure you file invoices and they can be easily found.
Explanation and Documentation of Transactions
When dealing with complex transactions we always recommend ensuring the following:
- The transaction is appropriately documented by an appropriately qualified lawyer;
- If as part of a transaction reliance is being placed on the use of a tax concession a position paper is drafted outlining the transaction and the associated qualifying criteria. You as a taxpayer are obligated to ensure you meet and understand that criteria to use that tax concession; and
- The transaction is implemented in accordance with the advice, note that a failure to complete even the simplest of paperwork can sometimes make a significant difference.
The ATO and Federal Government have been particularly supportive of business and taxpayers during COVID, handing out various levels of financial support. Whilst we are not totally out of the woods from COVID our regulatory bodies recognise that many businesses are trading strongly. The regulators will soon be turning their efforts to their compliance programs with an expectation that taxpayers are meeting their obligations.
Should you have any concerns or feel the need to improve in any of the above areas please reach out to us at [email protected] or (07) 3910 5675