Coming to the end of another financial year, we at Financially Sorted thought that its important to make you aware of a few changes that may affect you. Some of these changes are the biggest shake up since GST was introduced in July 2000. Please read them and let us know immediately if we can help!

Tax office to double audits of ‘dodgy’ rental deductions

(Source: NTAA – Voice Magazine June 2019)

Rental property owners are being warned to ensure their claims are correct this tax time, as the ATO has announced it will double the number of audits scrutinising rental deductions, with a specific focus on:

  • Over-claimed interest;
  • Capital works claimed as repairs;
  • Incorrect apportionment of expenses for holiday homes let out to others;
  • Omitted income from accommodation sharing.

Assistant Commissioner Gavin Siebert says that, this year, the ATO has made rental deductions a top priority:

“A random sample of returns with rental deductions found that nine out of 10 contained an error.  We are concerned about the extent of non-compliance in this area and will be looking very closely at claims this year.”

The Government recently allocated additional funds to the ATO to extend its program of audits and reviews of rental properties.

“We use a range of third party information including data from financial institutions, property transactions and rental bonds from all states and territories, and online accommodation booking platforms, in combination with sophisticated analytics to scrutinize every tax return,” Mr Siebert said.

“Once our auditors begin, they may search through even more data including utilities, tolls, social media and other online content to determine whether the taxpayer was entitled to claims they’ve made,” he said.

While no penalties will apply for taxpayers who amend their returns due to genuine mistakes, deliberate attempts to over-claim can attract penalties of up to 75% of the claim.

In the 2017/18 financial year, more than 2.2 million Australians claimed over $47 billion in deductions.

The ATO audited over 1,500 taxpayers with rental claims, and applied penalties totaling $1.3 million; including the following:

  • In one case, a taxpayer was penalized over $12,000 for over-claiming deductions for their holiday home when it was not made genuinely available for rent, including being blocked out over the seasonal holiday periods.
  • Another taxpayer had to pay back $5,500 because they had not apportioned their rental interest deductions loan to pay for living expenses.

“This tax time, our message to taxpayers is clear.  If you are renting out a room or a property, any money you earn must be declared as income and any deductions you claim may need to be apportioned for private use,” Mr Sibert said.

It’s time to ensure that your rental properties are following the correct legislation – we will be asking more questions if things don’t seem right! Its better to get things lodged correctly rather than to go through an audit down the track and possibly pay fines & penalties.

Single Touch Payroll Update

(Source: NTAA – Voice Magazine June 2019)

The ATO has reminded employers that legislation has been passed to extend Single Touch Payroll (‘STP’) to include all employers from 1 July 2019.

This will be a gradual start, and not all employers will start reporting at the same time.

Most software providers are offering STP – enabled products, although some providers have asked the ATO for a later start date (a deferral) for their employer clients to report through STP, so it may be worthwhile checking with the relevant provider.

We provided more in-depth notes about this in our recent June 2019 newsletter – please refer to it if you haven’t already.

If you have even one employee, this can not be ignored. Action is required!

Action required: Your insurance inside superannuation funds

You may have read or heard in the media about changes to do with your superannuation and insurance or you may have been contacted by your superannuation fund recently regarding life insurance inside your superannuation fund.

This is due to recent legislative changes where from 1 July 2019 superannuation fund trustees are prohibited from providing insurance cover where the member’s account has not received a contribution or rollover for a continuous period of 16 months or more.

Many of our clients have retained small balances inside their retail or industry funds so they don not lose their insurance coverage – this is now changing!

You can be excluded from this new rule (and retain your existing insurance) by making an election in writing to your super fund.

Super fund trustees are required by law to contact all members who have not had any contributions or rollovers for the period starting from 1 October 2018 to 1 March 2019 to offer them the opportunity to retain their insurance.

Should you wish to retain your current cover, you’ll need to follow the instructions provided by your super fund to opt-in.

If you do nothing, you will lose your insurance cover at the end of the period for which premiums have been charged.

This could have detrimental impact on you and your family as without adequate insurance cover you and your family may suffer financially should you pass away or become permanently incapacitated. Depending on your age and personal health conditions lost, you may find it difficult to obtain the same level of cover elsewhere.  

  • Need assistance with notifying your superannuation fund to opt-in to the insurance
  • Wish to review your current level of cover inside your superannuation fund to ensure it remains appropriate to your needs before deciding whether to opt-in or not
  • Have any questions

Please feel free to contact our office regarding these changes and the options thereon.

By doing nothing, your loved ones may suffer!

Instant asset write-off increased and extended

(source: ATO website)

Business clients should now be aware about the changes to the instant asset write-off.

The threshold has increased to $30,000 and has been extended to 30 June 2020.

The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million. These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed ready for use from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.

Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:

  • $30,000, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020
  • $25,000, from 29 January 2019 until before 7.30pm (AEDT) on 2 April 2019
  • $20,000, before 29 January 2019.

Business clients can’t immediately claim a deduction for individual assets that cost $30,000 or more. You can continue to deduct these over time using the small business pool or the general depreciation rules, depending on their turnover.