Under the microscope of the ATO

Welcome to the time of year when the ATO announces its individual target list for scrutiny.

There are several key areas the ATO will be considering for audits, including individuals who have made claims on Work Related Expenses and various rental properties, including Holiday Houses.

Work-related expenses claims have been on the radar for several years now, so further scrutiny is not surprising. This year they’ll be looking particularly closely at:

  • Claims for work-related clothing, dry cleaning and laundry expenses, and
  • Deductions for home office use, and
  • Mobile phone and internet costs, and
  • Overtime meal claims, and
  • Union fees and subscriptions.

Taxpayers need to ensure their records are accurate and they understand what they can and can’t legally claim. If asked, the ATO will request proof; invoices, receipts, diary notes, etc. and proof that the expenditure was in fact business related.

The ATO has also indicated that with about 8% of the Australian population owning an investment property, the ATO is targeting deduction claims in relation to investment properties and holiday homes. This will include:

  • Excessive interest expense claims – be sure you are not claiming the borrowing costs on the family home as well as your rental property, and
  • Incorrect apportionment of rental income and expenses between owners, for example, where deductions on a jointly owned rental property are claimed by the owner with the higher taxable income, rather than jointly, and
  • Holiday homes that are not genuinely available for rent. Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed. With the power of technology, it’s easier for the ATO to check your claims.
  • Incorrect claims for newly purchased rental properties. The costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately. These costs are deductible and should be depreciated over several years.

It’s simple to stay ahead – keep good records, and only claim what you can legitimately claim.  If you can’t substantiate it, don’t claim it.

If you’re concerned about the possibility of an audit or review, audit insurance is available and needs to be purchased ahead of an audit being raised.

In the coming few weeks, you will be receiving a letter from us regarding Audit Shield, which is tax audit insurance that we are offering to our clients.

The Australian Taxation Office (ATO) and other government revenue agencies continue to increase audit activity. As a result, we believe that our Audit Shield service, underwritten by Vero Insurance, continues to be a vital tool in protecting you against the potential costs (fees) if you are subject to audit/review activity. Fortunately for those clients who participated in our service last year, they were able to save on the costs incurred for us to respond to audit activity.

Our Audit Shield service provides for the payment of professional fees incurred because of you being selected for an audit, enquiry, investigation or review by the Australian Taxation Office (ATO) or any other government revenue agency.

The cost of being properly represented in these matters can be quite considerable depending on the length of time involved. Audit Shield provides a fixed, cost effective solution to guard against these unforeseen costs.

How likely am I to get an audit, enquiry, investigation or review?

The ATO, along with other federal, state and territory agencies, now have unprecedented access to taxpayer records, allowing them to specifically target previously unreviewed tax returns. Now more than ever, individuals, businesses and Self-Managed Superannuation Funds are at risk of being selected for an audit, enquiry, investigation or review.

Should you have any questions, please feel free to contact us, as we are happy to discuss with you the service and the benefits. Participation is not compulsory, although we believe in the advantages of the Audit Shield service, hence the reason as to why we continue to offer the Audit Shield service which allows our valued clients the opportunity of protection.

What is Income protection insurance?

(Source:  Australian Unity)

This insurance is designed to replace your income if you are unable to work due to sickness or injury.

It provides a monthly payment of usually up to 75% of your pre-tax income. Its purpose is to provide you with a regular income to help you cover your living expenses so you can focus on your recovery. Some policies also include additional payments for things like rehabilitation and home care.

Not many people risk being uninsured when it comes to their car or home, but many choose to not insure their most valuable asset – that is, their ability to earn an income.

This is despite the fact that most people will earn a fortune between now and when they retire:

How much will you earn from now until retirement+?

Income p.a.

Age Now

30

40

$60,000

$3,365,096

$1,786,685

$80,000

$4,486,795

$2,382,246

$100,000

$5,608,494

$2,977,808

$150,000

$8,412,741

$4,466,712

+ Assumes income increases each
year by 4%. Retirement age of 60.

This means that most families are carrying significant financial risk should the unexpected happen. The big question you have to ask yourself is:

‘Would your family be able to maintain their lifestyle if you suddenly couldn’t earn an income due to a serious illness or accident?’

If your answer to this question is no, you need to consider transferring that financial risk to an insurance company.

Your financial adviser can help you do that, as well as answer any questions you have about income protection insurance, and then calculate how much you need to safeguard you and your family in the event something should happen to you or your spouse.

Can you afford not to have income protection? Speak to us today to get some quotes for you!

20 Ways to Save Money!

No matter where you are on your financial journey, you need to know that it’s possible to make your hard earned go a little further.

Sometimes all it takes is that first step in the right direction to get things moving. Sometimes that very first step is the hardest part.

We have created a list of some simple ways to start saving money immediately. These little tips certainly won’t change your life on their own, but they can make quite a difference over time, especially if you’re able to implement more than one.

Obviously, not all of these tips will apply to everyone. Just go through the list and find a few that do apply to you and use them in your life. When you do, you may quickly find that you’re saving more money than you ever thought possible.

  1. Move bank accounts to take advantage of lower charges, new perks and earn more interest
  2. Turn off the television.
  3. Stop collecting, and start selling
  4. Sign up for every free customer rewards program you can.
  5. Make your own gifts instead of buying stuff from the store.
  6. Master the wait 30-day rule and then buy.
  7. Write a list before you go shopping – and stick to it.
  8. Invite friends over instead of going out.
  9. Repair clothing instead of tossing it.
  10. Don’t spend big money entertaining your children – there’s plenty of free stuff to do.
  11. Negotiate rates with your credit card company or complete a balance transfer.
  12. Clean out those closets.
  13. Drink more water.
  14. Avoid convenience foods and fast food.
  15. For heaven’s sake, quit smoking.
  16. Walk or cycle, don’t drive.
  17. Cut down your holiday spending.
  18. Turn off the lights.
  19. Swap books, music, and DVDs on the Internet or at the library.
  20. Have a garage sale at least once per year.

For Your Calendar…

  • 14 Aug Lodge PAYG withholding payment summary annual report for:
    large withholders whose annual withholding is greater than $1 million;
    payers who have no tax agent or BAS agent involved in preparing the report.

  • 21 Aug Lodge and pay July 2018 monthly business activity statement.

  • 25 Aug Lodge and pay quarter 4, 2017–18 activity statement if you lodge electronically.

  • 28 Aug Lodge and pay quarter 4, 2017–18 Superannuation guarantee charge statement – quarterly if the employer did not pay enough contributions on time.

    Lodge Taxable payments annual report – building and construction industry.