THE Institute of Public Accountants (IPA) is issuing a caution against businesses and individuals jumping in too early with this year’s tax returns.
“There are a lot of new variables such as COVID-19 related payments to be considered in submitting tax returns for the 2019/20 financial year,” IPA chief executive officer, Andrew Conway said.
“We understand that some individuals have been adversely impacted by COVID-19 and want to get their hands on their refund as quickly as possible.
“Loss of employment; reduced earnings; rental property losses due to tenants being unable to pay or have negotiated a lower occupancy rate; deductions for protective COVID-19 measures such as gloves, face masks, sanitisers; and increased working from home expenses, are some of the reasons why individuals are planning on lodging early this year with an expectation of a larger than normal refund on offer," Mr Conway said.
“Those who have lost their employment this year and have received JobSeeker will need to wait for Services Australia to load this information into the pre-fill as this entitlement represents income which is taxable and needs to be added to other income.
“Services Australia does not normally withhold tax so this may adversely impact on the individual’s overall tax situation which may turn a refund into an amount payable depending on personal circumstances. Similarly, if the employers have not withheld the proper amount of tax from JobKeeper payments this too can have an impact on the refund amount," he said.
“Another reason to hold fire, is that employers with 20 or more employees will have until July 14, 2020, to finalise single touch payroll data. Smaller employers have until July 31, 2020, to finalise. If someone has interest, dividends or trust distributions, then it is even more important not to lodge early until this data has had time to hit the pre-fill records.
“Another COVID-19 related issue this year is where a sole trader is receiving JobKeeper as an active participant. This represents income and needs to be included as part of their business income. Also, the cash flow boost is tax-free and can be excluded from business income," Mr Conway said.
“The ATO will also be continuing to look closely at work related deductions. It has a lot more granular data on what people are claiming so it is reminding everyone of the three golden rules: you must have spent the money and not been reimbursed, it must relate directly to earning your income and you must have a record to prove it.
“Our strong message is to wait for the information to become available before you lodge; otherwise, you may end up with an unexpected tax bill and angst down the track. Discrepancies will create reverse workflow and expose taxpayers to interest and/or penalties.
"The variables this year may be more complex, so we recommend not to rush in too early and seek advice from your public accountant,” Mr Conway said.