How to avoid scams when completing your tax return

How to avoid scams when completing your tax return

Tax

CPA Australia Australians should always be wary of online scams, but we are particularly vulnerable at tax time. Cyber criminals use a mix of tried-and-tested and new methods to attempt to defraud taxpayers, which is why CPA Australia is urging Aussies to be extra vigilant and take some simple measures to help protect themselves. Speaking on CPA Australia’s With Interest podcast this week, the ATO’s Assistant Commissioner of Cyber Governance, Joda Walter, said that ATO-branded SMS and emails containing links to fake myGov web pages remain one of the most common types of scams. Mr Walter also warned Aussies to be wary of fake social media accounts using the ATO and myGov brands. Most prominent on Facebook and X, these fake accounts interact with users and try to trick people into clicking links. How to spot tax time scams Distinguishing between legitimate and scam messages from the ATO is becoming increasingly difficult, however there are signs. “Scammers take advantage of any situation, and at tax time that means targeting unsuspecting individuals through unsolicited messages claiming to be the ATO or another reputable organisation – known as ‘phishing’ scams,” says CPA Australia spokesperson Gavan Ord. “These messages trick individuals into acting quickly and letting their guard down on the promise of financial gain or by convincing them they have done something wrong and need to rectify the situation quickly to avoid penalties. These scams prey on our natural instincts, which is why we need to stop and think before we click any links or give over any personal information.” “If in doubt, always stop, think, and don’t share any personal information, including your tax file number or bank details.” Young Aussies being caught out The ATO says that young Aussies aged 25-34 have been most likely to inadvertently share personal information to ATO impersonation scammers, but everyone is a target. “It can be hard for anyone to spot tax time scams and the fact that young, tech savvy Aussies are most likely to be the victim of ATO impersonation scammers should be a wake-up call to everyone,” said Mr Ord. “It’s definitely a good idea to check in with elderly and vulnerable family and friends to make sure they are aware of common scam types, but also remain vigilant yourself. It only takes a momentary lapse in judgement to be a victim.” Source: CPA Australia The information provided in this article is general in nature only and does not constitute personal financial advice.  

Is your number up this tax time? Claims the ATO will scrutinise

Is your number up this tax time? Claims the ATO will scrutinise

Updated on Tax

CPA Australia No one likes being treated as just a number, but with millions of returns and tens of billions of dollars at stake, that’s the reality when it comes to how the Australian Taxation Office (ATO) assesses tax returns. The ATO uses data-driven profiles based on things like employment type and financial investments to identify where some people may be pushing the boundaries. If your claims are disproportionate to what the ATO would expect from someone in a similar job to you, or with similar financial investments, you may be asked to provide additional evidence to validate your claims. That’s why CPA Australia is urging Aussies to be thorough with their tax returns, including declaring all earnings and having evidence to back up any deductions. Anything that stands out from the crowd may attract the ATO’s attention. “It’s important that everyone pays the right amount of tax and claims what they are entitled to,” said CPA Australia spokesperson Gavan Ord. “The ATO uses highly sophisticated analytics to scrutinise all claims, including those relating to working from home and motor vehicle expenses, income from rental properties, as well as undeclared income from investments like cryptocurrency. “Your tax return is your personal responsibility, and you should be as thorough as possible when declaring your income and claiming deductions. Failure to properly declare all of your income, or over-the-top expense claims, may set off alarm bells and your claims could be rejected if you don’t have the evidence.” Work-related expenses  Work-related deductions are the biggest deduction in most Australians’ tax returns, and some individuals may be tempted to overstate their expense claims in this area. Others may put in claims without sufficient evidence to support them. The ATO is focused on ensuring the correct apportioning of expenses between work and private use, including when you work from home. Keeping a diary of all your work-related activity and having the corresponding receipts is crucial. Your record should include: There are two ways to calculate working from home deductions – the fixed rate method (when you can claim a set rate of 67 cents for every hour worked from home) and the actual cost method. Having records mean you can choose which works best based on your individual circumstances. Motor vehicle expenses There are two methods of claiming a tax deduction for motor vehicle use for work purposes, but whichever is used, you must ensure the claim is accurate and properly evidenced, whether it’s for fuel, servicing or lease payments. If you use a motor vehicle for both business and private use, you must be able to correctly identify and justify the percentage you are claiming as business use. The percentage that is for private use isn’t claimable. To claim accurately, you will need to use a logbook or diary to record private versus business travel. Travelling from home to work is considered private use, unless you are a home-based business and your trip was for business purposes. Income from rental properties For rental property claims, the ATO is focusing on owners who make claims for renovations as repairs. Repairs to the property because of wear and tear or damage from tenants are tax deductible. However, if the work results in an improvement rather than just repairing damage, or results in the replacement of an asset, the expenses will be capital in nature and you can only claim a depreciation expense, not for the entire cost in the year it was spent. Claiming mortgage interest in full when there were drawdowns for private purposes, as well as declaring net income after expenses from annual rental summary of real estate as gross income, will also be under the microscope. Undeclared income (e.g. crypto profits) The ATO is also focused on undeclared income, now including money made from cryptocurrency. The most common use of crypto is as an investment, in which case the crypto asset is subject to capital gains tax (CGT). If you acquire a crypto asset as an investment, transactions such as disposal, exchange or swaps are a CGT event, and you may make a capital gain. If you hold the crypto asset as an investment, it will not be exempt from CGT as a personal use asset. You will make a capital gain if the proceeds from the disposal of your crypto asset is more than its cost base. To work out if you made a capital gain or capital loss from each CGT event, keep your records for each crypto asset and your transactions. You may be able to reduce capital gains using the CGT discount if you hold your crypto asset for at least 12 months. Source: CPA Australia The information provided in this article is general in nature only and does not constitute personal financial advice.  

ATO flags 3 key focus areas for this tax time

ATO flags 3 key focus areas for this tax time

Tax

Australian Taxation Office As ‘tax time’ approaches, the Australian Taxation Office (ATO) has announced it will be taking a close look at 3 common errors being made by taxpayers: • Incorrectly claiming work-related expenses• Inflating claims for rental properties• Failing to include all income when lodging ATO Assistant Commissioner Rob Thomson said the ATO is focused on supporting taxpayers to get their lodgment right the first time. ‘These are the areas that people are most likely to get wrong, and while these mistakes are often genuine, sometimes they are deliberate. Take the time to get your return right.’ Work related expenses In 2023 more than 8 million people claimed a work-related deduction, and around half of those claimed a deduction related to working from home. Last year, the ATO revised the fixed rate method of calculating a working from home deduction to broaden what is included, increase the rate, and adjust the records you need to keep. These changes are now in full effect this financial year, meaning you must have comprehensive records to substantiate your claims as you would for any other deduction. To use this method, you need records that show the actual number of hours you worked from home (like a calendar, diary or spreadsheet), and the additional running costs you incurred to claim a deduction (like a copy of your electricity or internet bill). ‘Deductions for working from home expenses can be calculated using the actual cost or the fixed rate method, and keeping good records gives you the flexibility to use the method that works for you, and claim the expenses you are entitled to.’ ‘Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.’ Mr Thomson said. Remember, there are 3 golden rules for claiming a deduction for any work-related expense: Rental properties Rental properties continue to remain in the ATO’s sights. Our data shows 9 out of 10 rental property owners are getting their income tax returns wrong. ‘We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this.’ ‘This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,’ Mr Thomson said. Performing general repairs and maintenance on your rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (like initial repairs on a newly purchased property and any improvements during the time you hold the property) are not deductible as repairs or maintenance. ‘You can claim an immediate deduction for general repairs like replacing damaged carpet or a broken window. But if you rip out an old kitchen and put in a new and improved one, this is a capital improvement and is only deductible over time as capital works.’ ’We encourage rental property owners to carefully review their records before lodging their return and take care to ensure they are claiming deductions correctly,’ Mr Thomson said. As reporting rental income and deductions can be complex, many individual rental owners choose to use a registered tax agent to help them prepare their income tax returns. ‘Ensuring you provide full and complete records to your registered tax agent allows them to prepare your tax return correctly, so you claim everything you’re entitled to and nothing that you’re not,’ Mr Thomson said. Get it right – Wait to lodge The ATO is also warning against rushing to lodge your tax return on 1 July. If you have received income from multiple sources, you need to wait until this is pre-filled in your tax return before lodging. ‘We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,’ said Mr Thomson. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and help you get your tax return right. ‘By lodging in early July, you are doubling your chances of having your tax return flagged as incorrect by the ATO.’ ‘We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge.’ ‘You can check if your employer has marked your income statement as ‘tax ready’ as well as if your pre-fill is available in myTax before you lodge. That way, an amendment doesn’t need to be made later, which could result in unnecessary delays,’ Mr Thomson said. Source: Australian Taxation Office The information provided in this article is general in nature only and does not constitute personal financial advice.  

EOFY is coming – Have you thought about …

EOFY is coming – Have you thought about …

Updated on Superannuation, Tax

The end of another financial year is looming, and with that may come thoughts about your tax return and how your wealth has tracked throughout the year. Whether you’re nearing retirement, a high-income earner looking to reduce your taxable income, or you’re on a lower income and looking for ways to maximise your super contributions; there are a few things you can consider at tax time. Nearing retirement? Maximise your super contributions If you’re nearing retirement, putting as much money into your superannuation account now is a good way to make sure you build up a healthy nest egg to live off in your golden years. To maximise your super contributions, consider salary sacrificing to put more money into your super account. Salary sacrificed super payments take money out of your pre-tax income. These are called concessional contributions and are taxed at 15%. This rate is lower than most taxpayers’ marginal tax rates, so it can be an excellent way to reduce your taxable income while increasing your superannuation savings. The maximum employer and salary sacrificed contributions that can be made each financial year is $25,000. And remember, if you’re self-employed, your concessional contributions are a tax deduction. Non-concessional contributions of up to $100,000 can also be made each financial year. These contributions come from your after-tax income. Consider a one-off contribution to lower your income tax Let’s say you’re on an income of $170,000. If you haven’t opted to salary sacrifice, your employer contributions to super will be $14,748.86 in the financial year. Therefore, your taxable income will be $155,251.14. To lower your taxable income, you could make a one-off concessional contribution of $10,000. This will reduce your taxable income and still come in under the concessional contribution cap of $25,000. Are you eligible for the Government co-contributions to super? If you earn less than $54,837 per year (20/21 financial year) before tax, you could be eligible for the Government’s co-contribution on after-tax super contributions. Those who earn under the threshold can make an after-tax contribution, and the Government will calculate your co-contribution amount when you submit your tax return. The co-contribution will be deposited directly to your superannuation account. Review your records now Now is the time to check you’ve been keeping good records. Have you got a record of relevant receipts and policy statements for items such as income protection policies you have outside superannuation? Understanding the paperwork you require now to maximise your deductions will save you time when it comes to completing your tax return. If you haven’t got all of your records organised, review your spending throughout the year, identify transactions that may be a tax deduction, and put aside those receipts for tax time. Looking for more help? If you’re looking to maximise your tax return and get ready for a successful financial year ahead, talk to a financial adviser about your options. It doesn’t matter your circumstances; there are options available to help you boost your super savings and get the best tax return possible.   The information provided in this article is general in nature only and does not constitute personal financial advice.

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