CPA issues simple advice to avoid 'poking the bear' this tax time

Tax time is drawing closer, and while YourLifeChoices reported on a warning from the Australian Tax Office (ATO) about a looming crackdown on tax returns last month, Australia’s leading accounting body is warning taxpayers to take the threat seriously.

CPA Australia tax policy manager Elinor Kasapidis explained the ATO had its full resources directed at people’s income and warned against ‘poking the bear’ this tax time.

She explained that the ATO had enhanced information gathering powers this year and that made it more important than ever not to omit income from your tax return.

Read more: ATO issues tax return warning

“Most transactions where money changes hands leave a digital footprint and the ATO has even greater information gathering powers than the police,” Ms Kasapidis said.

“If you’re thinking of playing hide and seek with the ATO, don’t expect them to close their eyes and count to 10.

“Assume they have full line of sight on your income and don’t poke the bear.”

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Each year CPA Australia publishes tax tips, and this year the advice for employees boiled down to three simple principles.

According to Ms Kasapidis they are:

  1. If you earned money, you need to report it.
  2. If you can’t prove an expense, you can’t claim it.
  3. If you want to make sure you’ve got it right, see a tax agent.

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“Employees’ starting positions should be, if you earned money, you need to report it. Then claim your deductions and pay tax on the difference,” Ms Kasapidis said.

“Claiming deductions for work expenses is the single biggest area where people go wrong; both by claiming too much or not enough.

“The way the tax system works, if you don’t claim a deduction, you won’t get it. Plenty of people miss out because they didn’t know to ask.”

She also reiterated the advice from the ATO last month regarding trying to get away with a set and forget tax return system.

“Don’t copy and paste last year’s deductions into this year’s return; it’s another sure-fire way to poke the bear,” Ms Kasapidis said.

She also suggested that COVID-19 would continue to have a significant impact on tax returns, with the ATO’s shortcut method for those working at home likely to save a lot of time and effort.

“This is the first full income year in a COVID-environment. We expect many employees’ tax returns will include COVID-related items,” she said.

“Tradies are often familiar with depreciation on tools and vehicles, but many white-collar workers haven’t used this deduction before and may overlook it.”

Employees who lost their jobs or worked reduced hours may have received a mix of government allowances, salaries and redundancy payouts during the financial year.

“It may come as a surprise to many people to learn that their JobSeeker and redundancy payments are taxable,” Ms Kasapidis said.

Some work-related expenses are less likely to appear in employees’ tax returns this year.

“COVID-19 has significantly decreased international and interstate trips as well as local travel. The ATO is expecting reduced travel and motor vehicle expenses and will be checking unusual claims.”

Do you prepare your own tax return or do you use the services of an accountant? Why not share your tax thoughts in the comments section below?

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Written by Ben