The Latest ATO Crack Down

At Fortis Accounting Partners, we like to keep you up-to-date with the regular ATO updates like crack downs. It is important to maximise returns and build wealth whilst complying with the ATO.  Three recent crack downs that have come to our attention are:

We have outlined these crackdowns in greater detail below to assist you in staying up-to-date.

1: ATO crack down on holiday rental property claims

The ATO is ‘increasing its focus on rental property deductions and is encouraging all rental owners to double-check their claims before lodging their tax return.’ More specifically, the ATO is scrutinising holiday rental properties claiming rental deductions that are higher than expected.

The ATO is taking a ‘prevention before correction approach’ says Assistant Deputy Commissioner Adam Kendrick, ‘we are sending letters to taxpayers in approximately 500 postcodes across Australia, reminding them to only claim the deductions they are entitled to, for the periods the holiday home is rented out or is genuinely available for rent.’

Simple rules for holiday rental owners:

1. You must keep accurate records
2. You cannot claim deductions for private use (includes family and friends renting free of charge). You can only claim deductions for periods when the rental is genuinely being rented out or is available
3. Deductions for at-below-market rates are limited to the amount of rent received during that specific time-frame

The rule concerning ‘genuine’ rentals raises the question: what indicates that a property is NOT genuinely available for rent? We have summarised the ATOs guidelines here below.

Factors that indicate a property is not a genuine holiday rental:

1. Property is promoted in ways that limit its exposure, for instance:

• Advertised through word-of-mouth
• Advertised through social network e.g. workplace
• Advertised outside of holiday periods whereby there are minimal chances of being rented out

2. Property’s poor condition, accessibility, or location means that potential tenants are unlikely to apply to rent the property. Unreasonable conditions are placed upon possible tenants relating to:

• Price
• Tenant requirements e.g. having no children or pets

2. ATO crack down on work-related expenses

Claiming work-related deductions is a great way to get tax back! Navigating the field of work-related deductions can be confusing so we have provided guidelines to help you maximise your returns without over, or under claiming.

Here are 3 golden rules of work-related deduction claims

1. Check if deduction is allowable

The ATO has very specific rules for given occupations and circumstances. For instance home office expenses cannot be claimed if you’re employer has an office in the town where you reside even if you work outside of normal hours.

2. Check if deduction is relevant to your profession.

Occupation is a crucial factor in deciding what deductions you are eligible to claim. For instance, sunscreen is a relevant work-related expense for a tradesperson, whereas the ATO may deem this irrelevant for an accountant.

3. Keep documents

The ATO recommends you to keep documents such as ‘payment summaries, receipts, invoices and contracts’ for five years;  this is just in case you are asked to substantiate claims you have made.

Click here to try the ATO’s deduction tool app to prevent missing out on a deduction from losing receipts. 

Below we have summarised 2 important work related ‘electronics’ and ‘travel’ expenses’ areas the ATO plays particular attention to.

1. Work-related Electronics expenses

‘You must be able to demonstrate how you used the device for work and you can only claim the work-related proportion of your use, excluding any private use’ the ATO advises. This can be demonstrated through internet bills and bank statements.

ATO assistant commissioner Karen Anstis stated “people are using their computers at home for work-related purposes but it is very important they understand the distinction between what is work-related and what is personal use.”

2. Work-related travel expenses

You are not permitted to claim expenses that were non-work related, even though  the expenses occurred during a work trip period.

Here is a list of common travel expenses you may claim deduction for:

• Transport: public transport (air travel and taxis fares) and car hire (includes parking fees and road tolls)
• Overnight expenses: meal and accommodation
• Vehicles: motorcycles and vehicles with a ‘carrying capacity of one tonne or more, or nine or more passengers’

For specific occupation guides, visit: https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Deductions-for-specific-industries-and-occupations/Deductions-for-specific-industries-and-occupations/

3. ATO Crackdown on Small Business Debt collection

There is speculation that small business garnishee notices, a form of ATO debt collection, are on the rise.

Garnishee notices allows the ATO to directly take money from someone that holds money for you now or potentially in the future.  The payments may come in the form of (a) a percentage of wages or (b) a given lump sum amount.

‘Smart Company’ Associate Editor Eloise Keating claims that garnishee notices take effect on businesses instantaneously. She says ‘cash that was there to pay employees and suppliers is taken by the taxman’…before the business itself has realised that the ATO has issued them a garnishee notice.

Who are your businesses’ garnishee notices issued to?

• financial institutions
• trade debtors
• suppliers

We hope this has helped you out

If you have any queries about your taxes, business finances or wealth management – do not hesitate to contact us on 9267 0108 or 9743 3600 to book a consultation, or visit our website at http://www.exemplary-financial.flywheelsites.com/.Our team of experts are only too happy to help.