Be smart when navigating instant asset write-offs, conscious of where JobSeeker and pandemic payments may have placed you, and aware of changing super guarantees. And if you’re hoping to cash in on COVID-related deductions that characterised the past two financial years, tread warily.
As the end of FY21/22 approaches, taxpayers should carefully consider their next moves.
RSM in Canberra accountant Minju Park says while many people have no intention of gaming the system, the Australian Tax Office (ATO) will be honing in on some common mistakes this year.
She says work-related expenses should be a significant area of focus.
“The ATO will specifically target excessive calculations of work-from-home expenses, in some cases requiring a diary or timesheet to ensure you’ve calculated correctly,” she says.
Claimants can use either the “fixed rate method” at 52 cents for each hour worked from home or the “short-cut method” at 80 cents per hour worked from home.
The latter, an all-inclusive temporary method to lighten the COVID-induced work-from-home burden, attracts higher deductions but the ATO will be probing for misuse.
“If you’re claiming internet and mobile expenses on top of your work-from-home expenses, you should use the fixed-rate method (52 cents),” Ms Park says.
“Be particularly mindful of apportioning your private and work-related usages correctly.
“For example, it’s not possible someone is using 100 per cent of their home internet for working from home.”
There’ll also be a crackdown on inappropriate claims on investment properties.
Ms Park says the ATO is expecting lower rental incomes than in previous years but warns excessive mortgage interest claims and incorrect claims of capital expenses as repairs, will be on the radar.
“Usually anything you add to your house above $300, such as air-conditioning or a dishwasher, should be claimed as a capital expense,” she says.
“Claiming these as repairs is incorrect and can lead to miscalculations.”
Apportionment will also be under the microscope when it comes to rental expenses for sub-lessors.
“If you’re living in the house but renting a room to someone else, make sure to claim the expenses according to the floor space proportion [percentage] of the subleasing,” she says.
As Australia shakes off the remnants of lockdowns, RSM assistant manager Claudia Youngman says those who claimed under the government’s temporary instant asset write off scheme should carefully consider their position so they avoid enormous tax bills in future financial years.
This measure extended the government’s previous instant asset write off scheme and, in some cases increased the thresholds for businesses to write off assets from $30,000 to $150,000, it was available for eligible businesses who were previously subject to annual depreciation claims under the capital allowance rules.
“Because these measures were introduced when the pandemic was kicking off, a lot of people would have already claimed immediate deductions of their assets instead of what they previously would have done [deducting only the depreciation value of an asset, so they would still have a portion of tax deduction flowing through in income years to come],” Claudia says.
“If they weren’t selective with the assets they chose to write off with this scheme, they would have no immediate tax deductions left and could end up with a big tax bill this year.
“There is still time to consult your accountant to better understand your tax position to make informed decisions. Should you bring any capital expenditures forward to this financial year? Perhaps defer invoicing certain jobs to next financial year? There are always measures you can take to best position yourself.”
Ms Youngman says similar thinking applies to JobSeeker and pandemic payments.
“A lot of people didn’t understand that when they were receiving these payments, they go towards your assessable income like a job would,” she says.
“Come tax time, if you had another job and you also got these payments, it may have pushed you into a higher tax bracket and you might end up with a higher tax bill.
“Again, there are things you can do that may have a material effect on your position and therefore your tax bill. You just need to be proactive, know your position, plan ahead and seek accountant advice.”
For more information visit RSM in Canberra or call (02) 6217 0300 to arrange to speak to a qualified tax accountant.