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Practice Update - OCTOBER 2023

Practice Update

October 2023

IMPORTANT TAX UPDATES FOR TAXPAYERS

The Australian Taxation Office (ATO) has issued important reminders and updates for taxpayers related to tax returns deadline, rental income reporting, PAYG installment methods, deduction requirements for personal super contributions, unused concessional contributions caps, and GST fraud prosecution.

🔶 TAX RETURNS DUE ON OCTOBER 31ST 🔶

The ATO urges independent tax filers to submit their tax returns on or before October 31 to avoid penalties of up to $1,565. This deadline also applies to taxpayers who have outstanding tax return from the previous financial year, even if they have a registered tax agent. While penalties are typically waived when refunds are due, this can only be made upon filing. Some key changes for the financial year 2022-2023 include revised deduction rates for work-from-home expenses, with the “shortcut” method reduced to 67¢ per hour and stricter documentation required for the “actual cost” method. Additionally, certain income levels will no longer receive the low-and-middle-income offset.

To ensure a smooth tax return process, self-filers should understand ATO requirements, maintain accurate records, and seek assistance when necessary. If you need an extended deadline and a hassle-free process, consider contacting Lynden Group before October 31st.

🔶 PROPER REPORTING OF RENTAL INCOME 🔶

The ATO advises rental property owners and their tax agents to be careful when filing tax returns. It’s important to accurately report all rental income, including income from short-term rentals, partial home rentals, and other rental-related income. Rental income should be reported in the year it’s received, before deductions like property management fees are applied. Three categories of rental expenses:

Expenses that cannot be claimed, including costs arising from personal use of their capital and property expenses.
Expenses eligible for immediate deduction in the income year when the expense is incurred. This includes items such as loan interests, council rates, general maintenance, as well as depreciating assets valued at $300 or less.
Expenses eligible for deductions over several years, including ‘capital works’ deductions and borrowing expenses earned from establishing a loan.

Taxpayers must keep records that show their rental property expenses and their relation to rental income.

🔶 CHOOSING THE RIGHT PAYG INSTALMENT METHOD 🔶

The ATO defines Pay As You Go (PAYG) instalments as “regular prepayments of the tax on your business and investment income.” The Tax Office offers two methods for PAYG instalments: the instalment amount method and the instalment rate method.

The instalment amount method is ideal for those with steady monthly income.
The instalment rate method suits those with seasonal income variations.

Taxpayers can adjust their instalments if they anticipate differences in their annual tax liability.

🔶 DEDUCTION FOR CONTRIBUTIONS DENIED

DUE TO NOTICE REQUIREMENT ISSUES 🔶

To claim a deduction for personal super contributions, individuals must notify their super fund and receive acknowledgment. The Administrative Appeals Tribunal (AAT) recently denied a claim due to notice discrepancies. The taxpayer’s notice did not match their actual contributions, and the fund did not acknowledge the amended notice.

🔶 UNUSED CONCESSIONAL CONTRIBUTIONS CAP 🔶

Individuals with a total superannuation balance under $500,000 as of June 30 of the previous year can make additional concessional contributions beyond the general cap. For example, if your total super balance is $450,000 at 30 June 2021, you can make catch-up contributions for your unused cap in the 2022 financial year. If your total super balance at 30 June 2021 is $550,000, you are not eligible to claim unused super contributions from previous years.

Take note that unused concessional contributions can be carried forward for up to five years. Notably, 2024 is the first income year to carry forward unused caps from the previous five years.

🔶 GST FRAUD PROSECUTION 🔶

A Mildura man was recently sentenced to seven-and-a-half years in prison for obtaining over $830,000 in fraudulent GST refunds. The ATO has initiated Operation Protego to combat GST fraud, targeting over 56,000 individuals.

These updates highlight the importance of accurate reporting, adherence to notice requirements, and proper tax planning. Taxpayers are urged to consult tax professionals for assistance with these matters.

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If you have concerns and questions regarding these issues, feel free to contact the Lynden Group at info@lyndengroup.com.au or give us a call at (03) 8548 1843.