The vast majority of individual taxpayers in Australia complete and lodge their income tax returns each year between 1 July and 31 October.
In the world of tax and accounting, this four month period is often referred to as tax season.
While most taxpayers who lodge through registered tax agents have deadlines that stretch well beyond 31 October each year, tax season and the days leading up to 31 October are an intensely busy time for the Affinitas Accounting tax team.
We get to welcome new clients and catch up with many of our once-per-year regulars.
Whether it’s via email or face-to-face, we get to deal with clients’ tax situations and answer questions and queries related to their income and expenses.
A poll of the Affinitas tax team produced the following list of 10 most commonly asked questions during the 2018 tax season.
These questions and our responses are summarised below.
Do I need to come into the office for my appointment?
No. Many of our clients from all over Australia and the world make use of our email service to prepare, check and lodge their returns.
I have had a phone call telling me I owe money to the ATO and I will be jailed if I don’t pay.
Every year unscrupulous people try to cash in on tax season by running these types of scams. If you are our client and you have a tax debt we will know about it. So just hang up the phone and call us to check what you are being told.
Why do I need to pay PAYG instalments?
While it is always much more exciting to receive refunds, some people lodge a tax return which results in a tax bill. This could be for a number of reasons – high bank interest, capital gains or other forms of untaxed income. If this happens, the ATO will assume you are going to continue to receive these tax bills and ask you to start prepaying towards next years bill. This is called a PAYG instalment.
Why do my PAYG instalments keep changing, I thought we had sorted this out?
Your PAYG instalment is calculated by the ATO based on the information in your most recently lodged tax return. Each time you lodge a new tax return, the ATO resets and re-calculates the amount. If you think it is excessive based on your current circumstances, then we can always amend this figure as long as we make a reasonable attempt to be accurate.
Can I pay my debt off with the ATO?
In most cases the answer is yes, provided you have a good record with your tax lodgements and no previous bad debts with the ATO. Normally, the ATO will allow you to pay off a debt over periods of up to 12 months.
What home office expenses can I claim?
It depends – that is the short answer. There are two broad categories of home office expenses . These are referred to as occupation expenses and running expenses. It depends on whether your are running a business from home or simply using your home to occasionally do some of your paid employment work. It is worth having a more detailed chat with us if you believe you may have a claim in this area.
Do I have to declare and pay tax my overseas rental property?
Generally speaking yes, unless you hold a temporary resident visa. Holders of temporary resident visas who have overseas rental properties need to declare the income earned from these properties, but will not need to pay tax on them.
Do I need to declare capital gains if they are under $10,000?
Yes, unless the capital gain is for what is classified as a personal use asset. There have been a lot of questions in this area related to cryptocurrency gains. In most cases, a gain on buying and selling a cryptocurrency is going to be considered a capital gain even if the amount is less than $10,000.
One of the most common misconceptions in relation to how tax deductions work in Australia. A refund reduces your taxable income, but ultimately the tax you get back (or save) is related to your tax bracket. For example, if you are in the 32.5% tax bracket, your $1200 deduction will provide a tax benefit of $390. This $390 will either be added to your refund or reduce any tax you have to pay.
Why can’t I claim that? My friend does?
Once again a very common question. Australia operates a self assessment tax system and under this system many self-preparers can misinterpret the rules relating to what is an allowable deduction. It’s only if and when they are audited that the ATO will disallow the claims. Our job as qualified professionals and registered tax agents is to do our best to ensure your tax lodgement is correct each and every year according to the tax laws of Australia.
If you think self-preparing sounds more lucrative as far as refunds are concerned, ask anyone who has been subjected to an ATO audit. They are time consuming, stressful and often result in the taxpayer having to repay many thousands of dollars worth of refunds, plus fines and penalties. Using a registered tax agent does not guarantee you will not be audited, but it should mean that the process will not be as time consuming or expensive. Options like buying tax deductible audit insurance also can provide peace of mind that our fees will be covered if we need to help you through a tax audit process.
Has that helped?
We hope so!