The ATO is watching you!

Its almost tax time again.

Last year I wrote a blog on “7 Handy Tips for the End of Financial Year” so binge here if you want a quick refresher of all those do’s and don’ts.

Just a gentle reminder that the ATO is increasingly strict on a couple of areas:

☑️Self-education expenses – you can’t claim for a course that does not have ‘a sufficient connection to your current employment’.

☑️Work clothes –  this is also a tricky area, because your work clothes need to be distinctive, like a stage costume.  But if it’s a suit that can be worn to any function, it wouldn’t pass the ATO test.

☑️Work related car expenses –  while you don’t need written evidence for claims of up to 5000 kilometres per year, you DO need to be able to show that you were required to use your car for work, and how you calculated your claim. A ‘standard deduction’ for car expenses, using the cents per kilometre method, is definitely NOT an entitlement and the ATO has flagged that they will be closely watching motor vehicle claims this year.

The ATO has new technologies which involve sophisticated data-matching and benchmarking – so never underestimate their ability to recognise dodgy, incorrect or false claims.  Once the ATO sees a red flag , trust me, they WILL investigate.

If you are unsure about any of your claims, please get in contact with us.  Always better to be safe than sorry.

The $20,000 Small Business Tax Write-off

Good news! The instant asset write-off has been a bonus for small businesses across Australia, and in the May Budget it was extended for another 12 months to 30 June 2019.

The law currently allows small businesses to obtain an immediate tax deduction for the whole cost of capital items purchased for use in their business, provided the cost of the asset is less than $20,000.

That could include computer equipment, office furniture, plant and machinery or even a new car.

Only small businesses can claim the deduction. To qualify, your business needs to have an aggregate annual turnover of less than $10 million.

Only assets valued at $20,000 or less qualify for the instant deduction. So if the value of the asset is greater than $20,000, the asset must be depreciated over a number of years.

To claim the full deduction, the asset has to be used in the business. If there is personal use of the asset, such as a computer that you use privately as well as in your business, the deduction needs to be pro-rated to reflect this.

So if your business needs to invest in a large capital asset of some kind (up to $20 grand), you are crazy not to take advantage of this offer while it’s still on the table.

Remember, it is possible to use this $20,000 option multiple times. However, the cost of each item must be under the threshold. It can also include items bought secondhand.

The ATO 2018 Hit List

The ATO has announced its 2018 hit list and one area of increased focus is what they call Unexplained wealth or lifestyle.”

ATO Commissioner Chris Jordan gives the example of a business-owning family which reported parent incomes of $70,000 and $50,000, but has three children at private schools and has taken business class flights on overseas trips three times in the past two years. (I sure hope they won Lotto or they are in BIG trouble!)

The ATO can source information through feeds from the Department of Immigration, and earlier this year, the ATO also announced they would be using social media platforms like Facebook and Instagram to monitor displays of wealth from individuals that did not match up with what they had reported about their income and affairs.

The ATO also keep a VERY close eye on activities which fall under the guise of the ‘share economy’.  If you have an investment property and rent it out under AirBnB or Stayz, or if you earn an income from Uber, Camplify, Airtasker, or even Ebay, the ATO WILL know about it.  The clever people at the ATO do some nifty data-matching with the cooperation of these company juggernauts.

Pretty sophisticated eh?

Big Brother is definitely watching us.  Be sure to check out any special deductions that are applicable to your circumstances, but DON’T go claiming things that push the envelope.  And definitely DON’T fudge or understate your income.  The risk is simply not worth it.

Give us a call on 02 9564 5885 if this is something that you’d like to discuss.  At Calculated Matters we are business tax experts, so if you have any questions about the content of this newsletter feel free to give us a buzz.

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