The ATO has announced the commencement of a data-matching program for property investors. This is in order to acquire residential investment property loan data from authorised financial institutions.
Sample audits conducted under the ATO random enquiry program, indicated a net tax gap of $9 billion for the 2019–20 income year. This was attributable to incorrect reporting of rental property income and expenses.
A significant driver of the gap was incorrect apportioning of loan interest costs. This happened where the loan was refinanced or redrawn for private purposes.
Data matching and tax compliance
The ATO will use the data to ascertain information about rental property loans, such as; repayments, interest charges, and borrowing expenses. This information will be used to identify, assess and treat several tax compliance matters, including:
Lodgment – confirming that taxpayers with rental properties are lodging tax returns and the relevant rental property schedule on or before the relevant due date;
Income tax – confirming taxpayers with a rental property are correctly reporting interest on the loan and borrowing expense deductions in their rental property schedules and associated income tax return labels;
Capital gains tax (CGT) – confirming the calculation of cost base elements used to determine the net capital gain or loss on a rental property used to generate income.
After a return is lodged, the ATO will use the data collected to identify relevant cases for action. This includes compliance activities and education strategies.
If a discrepancy is identified, taxpayers will be contacted by phone, letter, or email. Taxpayers will then have 28 days to respond before the ATO takes any action in relation to the discrepancy.
Other matters
ATO’s residential investment property loan data matching program will run from 2021–22 to the 2025–26 income years.
The data collected by the ATO will be made available to tax professionals through pre-filling reports in Online services. This is available to agents and practitioner lodgment service (PLS) through standard business reporting (SBR) enabled software.
Individual self-preparers may also access the data collected by the ATO through myTax. Specifically, the rental property schedule interest on loans or borrowing expense labels and rental income tax return labels.
Should you have any queries in relation to this program and its operation, please feel free to contact our office.
Whether you have a trust set up for investment or business purposes, there are some common elements to getting ready for the trust’s tax return.
Contrary to popular opinion, a trust is not actually a legal entity; instead, it is a formal relationship between other entities, where one entity holds property for the benefit of another entity, which could be a business or individual.
Because a trust is not a person or business entity, its income is usually taxed differently, although this depends on the setup and type of the trust. But even though the tax return is different, many other administrative aspects are the same as for any taxpaying entity.
Trust Administration
One of the most important administrative tasks to attend to is to hold a formal meeting before midnight on 30 June each year to document the basis of distributions to beneficiaries.
If you haven’t already done this for the 2023 financial year, talk to us as soon as possible so we can check your accounts and advise you on the best arrangements for beneficiary distributions.
Record Keeping
The other essential element of trust administration is record keeping. Although a trust may not be a legal taxpaying entity like a person or business, all records related to income and expenses must be kept for five years after lodgement of the income tax return.
Particularly important are records for any property owned by the trust. If a trust owns multiple properties, you must separate income and expenses according to each property.
If the trust earns income from overseas interests or investments, all these records must also be kept.
Capital gains, interest earned, and dividends received must also be documented.
The trustee must keep records of the trust deed, contact details, trustee resolutions, statements of assets and liabilities, all business contracts, and all records relating to wages and superannuation for employing trusts.
Trust Management
Trust management can be complex but well worth the time spent keeping good records to maintain asset protection, streamline the tax return process, and maximise the allowable tax deductions.
We’ll help with record keeping, managing investments, checking trust deed compliance, and simplifying the administration. And remember, the ATO has changed the rules around distributions, so we’ll advise you about the best way to allocate income to beneficiaries.
Talk to us now and start preparing for your next trust tax return.
A self-managed superannuation fund (SMSF) gives you control and flexibility over making investments and preparing for retirement.
It’s essential to get your deductions and record keeping right for the SMSF audit process and the tax return, as strict laws govern SMSFs.
An SMSF must be set up as a trust and have a legal document called a trust deed. A super fund trust is set up for the sole purpose of providing retirement benefits to its beneficiaries. The trust deed governs how the fund is set up and how it will operate and must be used in conjunction with the superannuation laws.
There are many different investment strategies for SMSFs according to the fund’s trust deed and operations.
Common Tax Deductions
Deductible expenses for SMSFs vary according to the nature of investments and the trust deed; however, some general expenses apply to most funds.
Operating expenses include management and administration, audit, and ASIC annual fees.
Investment-related expenses include interest, investment advisory fees, costs of servicing and managing investments, property fees, and brokerage fees.
Tax-related expenses, such as preparing the SMSF annual return.
Legal expenses, including amending trust deeds.
SMSF statutory fees and levies.
Insurance premiums for death, total and permanent disability, terminal illness, and income protection.
The tax deductibility rules for SMSFs differ from those for individuals and businesses. Many people are used to claiming deductions for certain things in business or property investment and find they don’t apply to SMSF tax returns. We can help clarify what’s deductible and what’s not.
Expenses must relate to the super fund’s sole purpose being to provide its members’ retirement benefits. There may be some items you want to query with us for the audit and tax return to see if they meet the sole purpose test, such as investment training courses, collectibles and artwork, travel expenses, or personal computers.
SMSF Annual Return and Records
Once the formal audit of the SMSF has been completed, the annual return must be lodged with the ATO. The annual return is not only a tax return but also reports regulatory information and member contributions. You must keep all records relevant to the annual return.
Keep all transaction, tax, accounting, and financial reporting records for at least five years.
Keep all records relating to trustee meetings, minutes, investment strategies, and appointments or changes of trustees for at least ten years.
Make Your SMSF Management Easy
SMSF management can be time-consuming. We can help with researching and managing investments, checking trust deed compliance, setting investment strategies, keeping records, and conducting the audit.
Talk to us now and get ahead for your next annual SMSF return.
Are you claiming all the small business tax deductions that you are entitled to?
Common Tax Deductions for Small Business
There are many expenses common to most small businesses, and there are other expenses specific to the nature of each industry and the goods or services your business provides.
Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, repairs and maintenance, insurance, and vehicle expenses.
Employment expenses include salary and wages, fringe benefits, superannuation, and training costs.
Other operating expenses may include things specific to your business, for example, point of sale systems, freight, professional membership fees, professional education, protective equipment, tools, or specialised software.
Capital expenses include machinery and equipment, vehicles, furniture, and computers. Depreciation for these assets may also be deductible if the expense was not claimed immediately.
Expenses must relate to running the business and providing the goods or services your business offers.
Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients, and some entertainment. Super and PAYGW are tax deductible when they are paid on time – but not if paid late!
There may be some expenses you want to check with us, such as private usage of business vehicles or other equipment, prepaid expenses, bad debts, loss of stock, and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.
What’s on the ATO Radar for Business Tax Returns?
Businesses whose benchmarks fall significantly outside the ATO’s small business benchmarks.
Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income-producing activities; you need records to verify the travel claims.
Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance, and registration. Keep a logbook to record private travel.
Fringe benefits – have you reported all benefits provided to employees?
Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records, including superannuation payments.
Instant asset write-off – the threshold remains at $20,000 this year, but there are rules about eligibility, so talk to us to see if the asset deduction claims apply to your business.
Maximise Your Business Deductions
Remember to keep all your business records for at least five years and payroll records for at least seven years. Companies must keep all records, including director meeting minutes, for at least seven years.
We’ll ensure you have time to plan for a tax bill, or if you are due a refund, you’ll get it within ten days of us lodging your tax return.
We’ll also check your business’s eligibility for concessions, offsets, incentives, and rebates and make sure your business is calculating taxable income correctly so you don’t pay more tax than you need to.
Contact us when you are ready. We’re here to help.
Your Accountant: The Mentor You Didn’t Know You Needed
Have you ever thought of your accountant as a mentor?
A business mentor can provide guidance and support, so you make the right decisions and stay focused on the end goal as a business owner. They can also help you move forward in your career by providing advice and feedback on the steps to take to reach success.
Why your accountant is the ideal mentor
Having someone who understands your business journey is incredibly important. You might see an accountant as someone who files your tax returns. But, in fact, we’re experienced business owners with access to a significant network of other business professionals.
An accountant can be the mentor you didn’t know you needed. No one knows your business better than us, so we’re perfectly placed to offer advice, guide your business journey and help you push your skills and capabilities as a business owner.
As a mentor, an accountant will:
Expand your knowledge as an entrepreneur – as business owners, we have the knowledge and experience to help you move your business forward. And we can work with you to expand your leadership skills, business thinking, and entrepreneurial ideas.
Be a shoulder to lean on – we’ll offer 1-2-1 mentoring sessions where we can listen to your unique worries and concerns as a business owner. Having someone on the same page to listen and empathise is vital for your business and mental health.
Guide the important elements of your business – we’ll help you manage and improve your business strategy, planning, and decision-making skills. We’ll also provide the management information systems you need to guide your finances and planning.
Keep your finances on track – we’ll show you how to maximise profits, reduce costs, and make better financial decisions. We’ll also help you plan your own personal wealth and tax strategies so that you can achieve your own entrepreneurial goals and lifestyle.
Introduce you to a broader business network – we work with hundreds of other business owners across various industries. This means we can link you up with other entrepreneurs and founders so you can connect with a network of like-minded individuals. This can be vital when brainstorming and benchmarking or if you need to talk to someone who understands the specific pain points you’re experiencing.
Having someone to guide your business journey can be invaluable. A business owner must grow and evolve along with their business. Regular mentoring catch-ups are ideal for progress, offloading your concerns, and looking for new inspiration.
If you want to grow as an entrepreneur, please come and talk to us about our mentoring services and how we can guide your business future.
Although tax returns for individuals are not due just yet, the financial year’s end is near. Get ahead now by preparing all the documents required for your tax return so you can get your tax done quickly and get any refund due to you in your bank!
Income
The Australian Taxation Office (ATO) automatically receives information from your employers about the salary and wages that you have been paid for the financial year.
You need to also declare all income (even if it’s just a small amount) from other sources on your tax return. You’ll also need documents such as statements, invoices, and reports to show all earnings.
Wages, salaries, allowances, or bonuses from all employers.
Pensions, annuities, or other government payments.
Investment income, including interest earned and dividends received.
Business and hobby income, if you have a side business as well as a job.
Foreign income.
Crowdfunding income.
Sharing economy income such as Uber or Airbnb.
Income from overseas sources.
Income such as hobbies, prize money, compensation, or insurance payments may be tax-free but check with us.
Work-Related Expenses
Employees are entitled to claim work-related expenses as a tax deduction. To claim a deduction, you must have spent the money out of your own funds and not have been reimbursed by your employer. The expenses must relate to your earnings as an employee. Ensure you have invoices and receipts as proof of payment for work-related expenses.
Expenses you may be able to claim
Vehicle and travel expenses – use a travel diary to record details of trips taken for your employment.
Clothing, laundry, and dry-cleaning expenses – occupation-specific clothing, uniforms, and protective gear can be claimed.
Self-education expenses – some education expenses that relate to your current employment are claimable.
Tools and equipment – if you buy gear to help you in your job, this may be claimable. Small tools of the trade, protective items, professional references, and laptops are some examples of equipment you may be able to claim.
Superannuation contributions you have made are separate from your employer’s contributions.
Occupation and industry-specific requirements – check the ATO fact sheets for your industry.
Working from home – new rules apply this year, making claiming expenses for working from home more accessible. Check the ATO information for details.
Register now for us to prepare for your tax return, and we’ll make tax time easy for you – and get any refund that is be due to you.
