Millions of Australians are feeling enthusiastic about receiving their annual tax refund, but filling your tax return on 1st July has the potential to land you in some serious trouble with the tax office.
The lure of a $1080 tax cut, available to millions of Aussies this financial year, might entice you to do your taxes early this year.
However, rushing in too quickly could result in your losing thousands of dollars, and possibly put you in the crosshairs of the Australian Tax Office (ATO).
The ATO often sees a lot of mistakes in early July, with people forgetting to include income from banks, dividends from shares, sharing economy platforms and cryptocurrency exchange.
This information will be automatically included in your tax return by the end of July. To avoid mistakes and refund delays, it’s best to wait for this information to be automatically included. If you want to lodge earlier, you must take care to manually add all your income.
A word of warning too, the focus areas for ATO for individual’s tax affairs this year are work-related expenses, rental deductions, and capital gains from cryptocurrency, property and shares. It is essential to make sure you declare all of them.
Understandably, individual taxpayers often want to get early access to their tax refunds but lodging early is a common mistake.
This means the ATO systems haven’t had a chance to prefill their tax return data. Often this leads to income being misreported resulting in ATO reviews or audits later.
The ATO expects more people may want to lodge early this year, because of the retrospective reduction in individual tax rates. The new rates applied from July 1, 2020, but were only delivered in part when the PAYG withholding tables were updated, midway through the financial year. This means more people will potentially receive refunds this year.
Don’t Be Too Early and Don’t Be Too Late Either
Besides the point that you shouldn’t lodge your tax return too early, equally you shouldn’t miss it altogether. Each year one in four Aussies fail to complete their tax return.
The low- and middle-income tax offset is also received through your tax return. If your taxable income is up to $126,000, you will get some or all of the low- and middle-income tax offset. Basically, if your income is less than $37,000, you will receive $255.
If your income is between $37,001 and $48,000, the tax offset will increase steadily to $1080. If your income is between $48,000 and $90,000, you will receive the maximum of $1080. If you earn over $90,000, and the offset gradually phases out, disappearing after $126,000.
It is essential for Australians to lodge their tax return if they want to receive the offset.
Cryptocurrency At Tax Time
Data from the ATO illustrates that there are over 600,000 taxpayers across Australia who have invested in crypto assets following a surging interest in the currency over the duration of the covid-19 pandemic.
This year, The Australian Tax Office (ATO) engaged around 100,000 taxpayers in the lead up to tax time to inform them about their required tax obligations as it moves to strengthen its stance on accounting for cryptocurrency.
On Friday 28th May, the ATO warned taxpayers that they will likely be contacted as there are growing concerns that many taxpayers incorrectly believe their cryptocurrency gains are tax-free or only taxable when their holdings are cashed into Australian dollars.
Furthermore, the ATO anticipates that their proactive engagement will result in at least 300,000 taxpayers to make note of cryptocurrency in their 2021 tax returns.
The ATO’s tough crackdown is followed by a softer educative approach adopted through the 2020 income year. Last year, the Tax Office contacted 100,000 taxpayers who had traded crypto assets and provoked 140,000 taxpayers to lodge returns.
The ATO is concerned that the anonymous nature of trading crypto assets led taxpayers to believe their investments were untraceable. ATO will head into tax time with access to more data and the ability to track those investing in crypto assets more closely.
The ATO is alarmed that a number of taxpayers think that the anonymity of cryptocurrencies provides a licence to ignore their tax obligations.
Although it appears that cryptocurrency operates in an anonymous digital world, the ATO has the power to closely track where it interacts with the real world through data from banks, financial institutions and cryptocurrency online exchanges to follow the money back to the taxpayer.
The ATO will use data-matching methods to link transactions from cryptocurrency-designated service providers to individuals’ tax returns, to ensure investors are paying the correct amount of tax.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
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