What to do when you have ATO tax debt

Have you found yourself in the following situation?

You have sold your investment property, or shares at a profit, and have spent the cash. You prepared your tax return and found out you have to pay capital gains tax.

You have started your own business in the last 12 months, cash flow is tight with slow paying clients. You have outstanding business activity statement debt.

You have lodged your tax return that resulted in an income tax debt.

Whatever your reason might be, you have ATO tax debt. The amount is falling due, or is overdue.

But you cannot come up with the funds to repay the debt in full.

What should you do?

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45 day rule – what does it mean to you?

When you purchase shares in the share market, the companies that you have shares in may declare a dividend. In most cases, the dividend amount comes with a franking credit, which is a rebate that shareholders get for the tax paid by the company. The amount of franking credit that you can claim is shown on the dividend statements that are issued to you.

You will then declare the amounts shown on the dividend statements on your tax return, where the franking credits will be taken into account when calculating your income tax liability.

But do you know that there are instances you may not be eligible to claim all the franking credits you have received?

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Shared economy – things you need to know

If you have a spare room, or some spare time, your friends may have suggested you to grab some cash by hosting your room on Airbnb or becoming an Uber driver.

You thought the idea of being able to generate extra cash without being tied up in an office 9-5, or having some flexibility on deciding when to work sounds cool, and (after a few drinks) your friends suggested that you do not need to report that as income, for whatever reasons.

Sounds too good to be true? Well, it sure is.

The ATO are focusing their attention on the “sharing economy” – the popular ones are Airbnb, Stayz, Uber and Taxify. Below are a few things to consider before starting your shared economy business.

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Need help with your tax return?

For those who are attempting to lodge their own 2018 tax returns this year, your due date to lodge tax return is 31 October 2018, this is only a week away!!!

Frustrated about having to lodge it in a week?

Unsure what information you should include in your tax return, or where to include them?

Want to know more about how to maximise your tax deduction and save on tax?

Too busy to be lodging a tax return when you’d rather be spending time on something you’d enjoy – like picnic with family?

We are here to help.

If you engage us to be your tax agent by 31 October 2018, you may be entitled to have additional time to lodge your 2018 income tax return (of up to May 2019).

We promise we will be gentle, and the process won’t hurt 🙂

Come and have a chat with us, or email us to start the conversation.

ATO eye on ‘standard’ deductions

The ATO have recently issued warnings of increased audit activity such as motor vehicle claim for 5,000kms, work-related expenses up to $300 and laundry expenses of $150. These items are claims you can make where you do not have to have kept actual receipts for every expense, however the ATO is stressing that this does not make them “standard deductions” that everyone can claim automatically.

The ATO are not saying that you cannot claim these in any circumstances, but they are saying that they can only be claimed where you have actually incurred the expense and have made a reasonable calculation of the amount you are claiming.

Motor vehicle expenses

For motor vehicle expenses you need to be able to show how you calculated the number of kilometres you travel for work and have you remembered that you cannot claim travel between home and work unless you need to carry bulky tools.

Laundry

For laundry expenses the ATO allow up to $150 claim without substantiation. However, you need to be able to show that you need to wash your registered uniform or protective clothing using the ATO’s estimate of $1.00 per full load and $0.50 per part load. So to claim the full $150, you will need to be able to justify that you wash your uniform 150 times per year.

Work-related expenses

For work-related expenses you need to be able to explain what sort of expenses they were and how they add up to the amount you are claiming. If you are claiming for a home office as part of your work-related expenses, you need to have a dedicated office space and a reasonable estimate of the number of hours that you work from home.

The ATO are concerned that a large number of taxpayers are using Motor Vehicle, Work-related expenses and Laundry as “standard” deductions when they do not actually need to incur the cost for their work.

If you have these type of deductions we will contact you prior to finalising your return to make sure you are comfortable that you could provide further information if your tax return is reviewed by the ATO.

The ATO have sent out many media releases about this in the past few weeks, so you may have already been alerted to their increased audit activity from items in the news. Here is a link to one of ATO’s media releases about the dangers of claiming unsubstantiated deductions.

There is a more comprehensive summary of the ATO’s crackdown here.