One of the main keywords in the 2018 federal budget is tax cuts! A seven-year tax reform simplifies the individual income tax system, cuts individual taxes for some, and provides more tax credit benefits. But, knowing that taxes have always been a major source of government revenue, the cut is expected to cost government A $2 billion in tax cuts.
Labour leader Bill Shorten made an A $5.8 billion tax cut promise yesterday, saying that if Labour came to power, millions of workers across Australia would receive a tax cut of up to A $928 a year. More than the $530 tax cut offered in the federal budget.
1. ATO gets funding to scrutinize tax returns
So along with the tax cuts, the federal government also allocated 260 million Australian dollars to the Australian Taxation Authority (ATO) to scrutinize taxpayer-declared cars and job-related content, including uniforms, the Internet, and so on. To prevent over-reporting similar to previous years.
It is reported that more than A $130 million of this will be used to allow ATO to increase compliance activities over the next four years, including additional audits and speed of work for ATO debt collectors. So that they can sue more "law-abiding taxpayers who take advantage of the law-abiding taxpayers".
Financial Services and Taxation Minister Kelly O'Dwyer also warned tax agents that not only bad taxpayers, but their tax agents are also ATO's main review targets. Many taxpayers who are considered to be the key reviewers will also receive real-time information to remind them not to over-report when filing tax returns.
If overpaid taxes can be recovered, government will make A $1.2 billion net over the next four years and a $700m cap on business-related fees.
2. Tax review focus
01. Work-related costs
There are several areas in which taxpayers are prone to make mistakes:
a. Work-related installation, dry cleaning and laundry
b. Home office cost deduction
c. Overtime meal
D. Trade union fees and membership fees
e. Mobile phone and Internet charges
In addition, job-related car expenses tax returns are also the focus. Kath Anderson, assistant director of the Inland Revenue Department, said that ATO, aware of the problems with tax returns on working cars, is now paying special attention to this area mainly because there are too many people making relevant declarations. Although only a small number of people are over-declared, it has become a huge expense.
About 3.75 million Australians reported job-related spending in the previous fiscal year, totalling A $8.8 billion, of which car-related costs accounted for more than 40 percent of the total.
Now that ATO receives government funding, there will be more manpower and material resources to focus on reviewing the declaration. Taxpayers face a fine of as little as A $4200 if they find that they provide misleading statements in their tax returns. If there is evidence that it was intentional to mislead, it faces a fine of as little as A $12,600.
Before filing a tax refund application, ATO recommends ensuring that the three gold principles are met:
a. You have to pay the money and have not been reimbursed;
b. Expenses must be directly related to your income, not private expenses;
c. You must have a record proof.
02. Investment property related expenses
People who declare tax rebates for investment properties and holiday homes. According to ATO, more than 1.8 million people (about 8 percent of Australia's population) own an investment home, and that number is growing.
Kath Anderson, assistant director of the Inland Revenue Department, said many holiday home landlords used to file tax rebate payments that were not expenses incurred when renting houses. These houses are not used for rental, but rather for their own homes or for vacations for their family and friends. "if your property is exclusively for rental, then you can report the costs associated with the rental," Anderson said.
But if the landlord rents the house to family and friends for a small fee, the amount of tax rebates they can file cannot exceed their rental income, if for some time you live on your own or let your family and friends live free of charge. You can't use this part to declare a tax rebate. The items that can be declared are maintenance, day-to-day maintenance, cleaning expenses, municipal expenses and rental advertising fees. A disproportionate amount of tax rebate and income declared by the landlord will be subject to scrutiny by the Inland Revenue Bureau. "about 80 percent of homeowners rebate on interest payments on loans, which account for half of the total rental expenses," he said.
ATO can determine if a property is "renting" by accessing third-party data sources, including popular holiday rental sites such as Stayz and Airbnb.
03. Overseas income attempted to conceal
High-wealth people with money flowing into foreign bank accounts have also become a focus of ATO's attention, with government investing in four income matching programs that allow ATO to examine taxpayers' sources of overseas income.
The ATO recently identified 106 taxpayers who used to hold Swiss bank accounts with secret names to evade taxes, making 5,000 cross-border deals worth more than $900m over the past 10 years. Each transaction ranges from $25 to $24 million. These acts of tax evasion have now led the ATO to lock them down.
Financial Services and Taxation Minister Kelly O'Dwyer says taxpayers who have withheld overseas revenues are welcome to come forward and contact ATO. If the tax rebate is not timely, it is likely to face skyrocketing fines, if the amount is huge, there may also be a prison sentence.
3. What if you made a false declaration in the last fiscal year?
If you happen to receive this letter from ATO, please take care of it as soon as possible.
Before 1 June 2018,
a. Log in to myGov, to apply for corrections to tax returns
b. Find a tax agent to help correct the tax return
Otherwise, it is possible to face different amounts of fines.
ATO has conducted a survey of some taxpayers and found that more than half of the respondents thought it was right to withhold some of the information properly when filing their tax returns. But for the ATO, each taxpayer gets an extra A $100, which adds up to a huge sum. Hope that taxpayers will be able to comply with the tax returns, get what they deserve, and do not take the risk!