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Practice Update
May 2024
🔶 FEDERAL BUDGET DELIVERED ON MAY 14TH 🔶
On Tuesday, May 14, 2024, Treasurer Jim Chalmers delivered the 2024-25 Federal Budget, which aims to balance relief with restraint. It includes power bill rebates for households and small businesses, cheaper medicines, and tax cuts to address the cost-of-living crisis without worsening inflation. Small businesses benefit from continued instant asset write-offs for purchases under $20,000. The Future Made in Australia package supports various businesses. Additionally, the ATO’s review, audit, and taskforce programs will receive increased funding to enhance tax collection, targeting individuals overclaiming deductions and multinationals with complex affairs.
🔶 ATO HIGHLIGHTS THREE KEY FOCUS AREAS FOR TAX TIME 2024 🔶
As tax time approaches, the Australian Taxation Office (ATO) has identified three common areas of concern:
1. Work-Related Expenses:
- Many taxpayers incorrectly claim work-related deductions, especially for working from home.
- Ensure you have detailed records of hours worked and related expenses.
- Remember, copying last year's claims without proper records may result in disallowed deductions.
2. Rental Property Claims:
- Common errors include inflating repair and maintenance deductions.
- General repairs can be claimed immediately, but capital improvements must be depreciated over time.
- Carefully review and document all rental income and expenses.
3. Including All Income:
- Many forget to include all sources of income, such as bank interest, dividends, and government payments.
- Wait until late July when most income data is pre-filled to ensure accuracy and avoid errors.
ATO Assistant Commissioner Rob Thomson emphasizes the importance of accurate and complete records to avoid mistakes. Waiting to lodge until your pre-fill information is available can save time and prevent unnecessary delays.
🔶 ATO FOCUSES ON RELATED PARTY TRANSACTIONS FOR
NEXT 5,000 PRIVATE GROUPS 🔶
The Australian Taxation Office (ATO) advises taxpayers in the Next 5,000 private groups tax performance program to carefully report and maintain records for related party transactions. Key recommendations include:
- Accurate Record-Keeping: Ensure all business income and expenditure, including tax invoices, are properly documented and reported in tax returns and Business Activity Statements (BAS).
- Evidence of Pricing Arrangements: Maintain comprehensive records of related party pricing arrangements, such as loans, leases, and service agreements.
🔶 ATO EMBRACES BEST PRACTICE PRINCIPLES FOR
DEBT NOTIFICATION 🔶
The Australian Taxation Office (ATO) has welcomed a recent report from the Commonwealth Ombudsman, ACT Ombudsman, and the Inspector-General of Taxation and Taxation Ombudsman (IGTO) titled ‘How to Tell People They Owe the Government Money’. The ATO fully supports the five principles outlined in the report:
- Accountability
- Clear explanation of actions
- Providing comprehensive information
- Accessibility
- Commitment to learning and improvement
For active debts, the ATO reaffirms that it explains the debt to taxpayers, its origin, offering payment options, and continuously improving its practices. When a debt is deemed uneconomical to pursue, the ATO may put it ‘on hold’. Taxpayers should be aware that the ATO does not actively seek payment for debts that are on hold, and no action is required from them. However, the ATO is legally required to apply any credits or refunds to reduce the amount of these debts. For debts placed on hold since 2017, this offset typically occurs when a taxpayer files their tax return.
For debts placed on hold prior to 2017, the ATO has temporarily halted all actions while a review is conducted. During this period, the ATO will not use taxpayer credits or refunds to reduce these older debts. No final decision has been made regarding the outcome of this review.
🔶 UPDATES TO TRUST TAX RETURNS 🔶
Following the March 2022 Federal Budget announcement, the ATO will implement changes to the annual tax return forms to streamline reporting for trustees, beneficiaries, and their tax agents.
Starting 1 July 2024, affecting lodgments for the 2023-24 income year onwards, the changes will include:
- Modifying the labels in the statement of distribution to enhance the reporting of beneficiary details, including new capital gains tax (CGT) labels.
- Introducing a new Trust Income Schedule that all trust beneficiary types receiving trust income must lodge with their tax return.
- Adding new data validations to the trust tax return form.
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