The Australian Government recently published the 2018 Federal Budget. They announced some important changes related to tax, claims & SMSF. We wanted to provide an update on what is happening and keep you in touch with future changes.
Incorrect claims in tax agent lodged tax returns
Assistant Commissioner, Adam Kendrick, of the ATO has provided some information to professional associations in response to tax agent concerns regarding the Commissioner’s comments during his recent speech to The Tax Institute concerning work related expenses and other deductions.
“In our work to date, our enquiries have revealed errors across the return but most adjustments relate to deductions, particularly for work-related expenses. The majority of errors relate to mistakes or carelessness. However, we also have seen instances of deliberate over-claiming.
Most commonly, we see claims where there is no connection to income earnt or no substantiation to show an expense was incurred. We see claims for private expenses or incorrect apportionment between private and work use. We also see substantiation exceptions used as ‘standard deductions’, regardless of whether the taxpayer has actually spent the money.
These errors occur in both self-prepared and agent-prepared tax returns. For self-preparers, our enquiries indicate a lack of knowledge or misunderstanding about what is claimable. For tax professionals, contributing factors include a lack of care, time pressures, outdated knowledge and pressure to accommodate clients’ expectations of a refund.”
Proportionally, it is a small number of agents who seek to deliberately undermine or abuse the system. We have strategies in place to identify and monitor these agents. Our interventions include audits of their clients, the practice and the tax agent’s own affairs as well as referrals to the Tax Practitioners Board (TPB). We also follow up on information provided by the community and other practitioners to protect the integrity of the profession and the tax system.
More broadly and perhaps most importantly, we scrutinise every tax return, regardless of the lodgement channel. For example, returns lodged through myTax are subject to the same controls and risk models as those lodged through an agent. Use is made of analytical models to compare claims, anomalies are flagged and taxpayers are prompted to check their claims (for agent prepared returns the prompt is included in our prefill service).
In fairness to those who do the right thing, we take action against those whose claims are incorrect or who intentionally falsify information on their tax return, including penalties or prosecution in serious cases. We have referred over 20 agents to the TPB this year for questionable practices involving false WRE claims.
I would emphasise that our processes are intended to make it as easy as possible for individuals to get their tax right – whether they choose to prepare their own return or use the services of a tax agent. There is certainly no intention to single out agents or negatively impact their practices through these processes. Tax agents play an important and valued role in supporting the administration of the system.”
New laws to regulate cryptocurrency providers
On 11 April 2018, AUSTRAC announced the implementation of new anti-money laundering and counter-terrorism financing (AML/CTF) laws to cover the digital currency exchange providers (DCEs) of cryptocurrencies including bitcoin. Effective immediately, DCEs with a business operation located in Australia must now register with AUSTRAC and meet the government’s AML/CTF compliance and reporting obligations. There is a transition period until 14 May 2018 to allow DCEs time to register.
Gazette – Notice of Data Matching program
Commissioner of Taxation – Notice of a Data Matching Program – Motor Vehicles – The ATO will acquire information during the 2016-17, 2017-18 and 2018-19 financial years, on vehicles that have been transferred or newly registered where the purchase price or market value is equal to or greater than $10,000. Data will be acquired from the eight State and Territory motor vehicle registry authorities. These records will be electronically matched with ATO data holdings to identify non-compliance with obligations under taxation and superannuation laws.
2018 Federal Budget – in brief
Personal tax cuts for low and middle income individuals commencing from 1 July 2018. This is applied through a tax offset and the maximum benefit is $530 pa.
32.5% personal income tax bracket will change from $37,001 – $87,00 to $37,000 – $90,000.
Proposed 7 year Personal Income Tax Plan which pushed further tax relief out to 2022 and beyond.
For small businesses, the government announced the extension of the instant asset write off limit at $20,000 for one more financial year, to end on 30 June 2019.
A Black Economy package which includes the denial of a tax deduction where PAYG withholding tax was required but not withheld and where a contractors has provided an incorrect ABN or no ABN and there has been no PAYG withheld. There is also a proposed an economy-wide cash payment limit of $10,000 from 1 July 2019. Payments in excess of $10,000 will need to be made through an electronic payment system, or by cheque.
The Taxable payments reporting system, currently applied to the construction industry, will be extended to the cleaning and courier industries from 1 July 2018. It is also proposed to further extend this reporting regime from 1 July 2019 to the security and investigation, road freight transport and computer system design services industries.
Other black economy measures are additional funding to further enhance the ATO capabilities in data analytics, data capture and matching, illegal company phoenixing and the creation of mobile ATO strike teams.