In recent years, the ATO has provided a target area of scrutiny, usually an occupation such as doctors, tradies or salespeople. Last year, they broke with tradition and focused on tax deductions related to computers and mobile phones. In keeping with the change, this year they have issued a warning to owners of investment properties across all sectors as well as work-related expenses and the cash economy.
There are 1.8 million Australians – or 8% of the population – with investment properties. The scrutiny is likely to impact squarely on many SMEs who use property as both an investment and place of business.
The ATO estimates that property owners claim an average of $25,717 in deductions including interest, repairs and maintenance. In most cases, this amount is a net loss which can then be offset against other income. As the popularity of property as an investment continues to grow, we can expect ongoing attention in this area.
You’ll also need to stagger the deductions of any large scale capital works or repairs over several years.
Holiday rental properties are particularly vulnerable, as the ATO now has access to third party data that can determine the value of a property as well as whether or not it was rented out for the period claimed in tax returns. If you own the property with a spouse who claims less tax than yourself, you’ll need to be aware that the deductions or capital expenses need to be shared equally if the property is owned equally.
Excessive work-related expenses such as mobile phones, or double-dipping on travel expenses, will also fall under the spotlights as the ATO continues to target tax payers who unfairly claim a disproportionate ratio of expenses used for business purposes.
Cars fall into this category, which means you need to be aware of which accounting method is applicable to you and your business. This is an easy trap that many SMEs fall into but one that is easily avoided.
The cash economy
It’s becoming increasingly easier to track the movement of cash through share registries, banks, titles offices, auction houses and even employees and employers. If you operate in a business that only accepts cash, it’s never been easier – or in your interests – to comply.
In 2014, the ATO uncovered $950 million in liabilities through cross-checking individual returns alone. Further liabilities were uncovered using web-scraping, whereby popular restaurant and café review portals as well as online auction websites easily detected those operating cash-only businesses.
The SuperStream deadline is approaching
By September, 2015, the ATO expects that the 800,000+ employers who are now required to make super guarantee contributions on behalf of their employees to be compliant. With so many different super funds, this can be a complex undertaking. You can simplify the process by either upgrading your existing payroll software or outsourcing the payroll functions.
The changes are designed to provide a single channel when dealing with employee super funds, less time spent dealing with employee issues, a reduction in costs associated with processing contributions and payments as well as a more timely flow of information and contributions.
Whichever way you choose to comply, you’ll need some advice as well as preparing some basic information to support contributions made electronically using SuperStream. Call us on (03) 9587 9747 to discuss your options if you haven’t already decided how to proceed.