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What you need to know ahead of the October 31 tax deadline

If you don’t lodge by 31 October 2023 (or haven’t registered with an agent by that date), you could be looking at a stiff fine for not lodging.

The so-called “failure to lodge” penalty is calculated at the rate of one penalty unit for each period of 28 days or part thereof that the return is overdue, up to a maximum of five penalty units. The value of a penalty unit is currently $313 so the maximum penalty which can be applied for an individual is $1,565..

The good news is that, whilst the penalty is normally applied automatically, it is not normally applied to returns that either have a nil result or generate a refund. In addition, where a penalty is applied, the ATO will sometimes remit it where it is “fair and reasonable to do so”, for example in the event of natural disaster or serious illness.

As a reminder, most people who earn more than the tax-free threshold – currently $18,200 – are required to lodge a tax return. In some cases, you may be required to lodge even if you earn less than that amount, for example if you worked and had tax deducted from your pay.”

When to contact an accountant by to extend their deadline to May 2023?

“The deadline for lodging your tax return of 31 October 2023 is looming. But you can actually lodge much later than that without being penalised; you simply need to be registered as a tax agent client by 31 October 2023 and you can lodge your tax return through that agent as late as 15 May 2024.”

Hundreds of dollars being left on the table in unclaimed deductions 

“It pays to get smart when claiming working from home expenses for the year ended 30 June 2023. The ATO has recently taken action against the millions of taxpayers who work from home and have been claiming working from home expenses as a tax deduction. Of course, they don’t phrase it that way – instead they talk about simplifying the system and making it easier for taxpayers to claim. But the effect is clear – many taxpayers will struggle to make a claim this year and of those that do, the majority will see far smaller claims. 

This has happened because the ATO has abolished the 80 cent per hour “shortcut” rate and also the 52 cents per hour fixed rate to calculate your deductions. Instead, they have introduced (from 1 July 2022) a new fixed rate of 67 cents per hour, with enhanced record keeping requirements and a changed mix of item which are included in the rate.

The revised fixed rate of 67 cents per work hour covers:

•             energy expenses (electricity and gas)

•             phone usage (mobile and home)

•             internet

•             stationery and computer consumables. 

No additional deduction for any expenses covered by the rate can be claimed if you use this method. 

For the first time, phone usage and internet expenses are included in the fixed rate method. These were previously excluded from the fixed rate method, which allowed a separate deduction to be claimed for these expenses. Note that under the new rules, if you use your mobile phone for work purposes when you are out-and-about, as well as at home, you can no longer claim a separate deduction for this use and still use the fixed rate method. If you wish to claim actual use of your mobile phone (or home internet), you must claim using the actual method for all working from home expenses.

The following expenses can be claimed separately and aren’t included in the fixed rate:

•The decline in value of assets used while working from home, such as computers and office furniture. 

•The repairs and maintenance of these assets.

•The costs associated with cleaning a dedicated home office. 

The revised fixed rate method doesn’t require that you have a dedicated home office space to claim working from home expenses. So, if you work from the kitchen or living room, you can still claim a deduction.

The biggest burden of the new fixed rate is the amount of substantiation required to claim.

You need to keep a record of all the hours worked from home for the entire income year. This obligation kicks in from 1 March 2023. Before then, a 4-week representative diary or similar document will be required for the period 1 July 2022 to 28 February 2023.

The ATO won’t accept estimates, or a 4-week representative diary or similar document for any period after 1 March 2023. 

Records of hours worked from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year. 

In addition, records must be kept for each expense that you have incurred which is covered by the fixed rate per hour (for example, if you use your phone and electricity when working from home, you must keep one bill for each of these expenses).

My 5 tips to help people navigate the new working from home rules are:

1. Educate yourselves as to how these new rules work and the new compliance obligations. 

2.If you don’t have proof of how many hours you worked from home PLUS a copy of at least one bill for each of the expenses, you won’t be permitted to use the fixed rate. And you probably won’t be allowed to claim the actual rate either because for that, you need full substantiation of all the expenses!

3. Good news for people working from small or crowded properties – the fixed rate will now be available where you don’t have a dedicated home office. So, if you work from the kitchen table or the lounge sofa, you can still claim the fixed rate (which is one of the few improvements of the new rules compared to the old ones!). Beware – if you claim actual costs, you do still need a dedicated home office.

4.What is working from home? Beware that the ATO won’t allow you to claim for minimal tasks such as occasionally checking emails or taking telephone calls while at home.

5.If you live with your parents or others and don’t pay a market rent to live in the property, you can’t claim. The ATO gives as an example, someone who lives with their parents and pays a token amount of board – they can’t claim even if they have a dedicated home office because they don’t incur any additional costs to work from home. The parent might well incur additional costs – but as they aren’t the ones working from home, they can’t claim! The ATO disregards token amounts of board for these purposes.

Any other tips for claiming tax deductions?

See if you are entitled to the following expenses and make sure you claim if you are!

Self Education expenses

You can claim expenses for university or TAFE fees to the extent that the course relates to your current employment and you’re not being reimbursed. You can also claim associated costs such as text books, travel to the educational institution and stationery. If you need to undertake ongoing professional development to keep up to date with the latest practices in your trade or profession, these costs will also be deductible to the extent they are linked to your current job. You cannot, however, claim for a pre-vocational course (a course which you do to enable you to get a job in a particular field).

Professional memberships and subscriptions

If you’re a member of a professional or trade association as part of your work, you can claim a deduction for the amount you pay in subscriptions. This also covers union fees if you’re a member of a trade union, as well as subscriptions to trade or professional magazines. 

Rental Property Expenses

Most people with a rental property know that you can claim a deduction for the interest element of the mortgage but there are plenty of other deductions you can claim on a rental property, many of which are often overlooked. So, if you’ve paid out for any of these costs this year, make sure you claim a deduction:

· Gardening and lawn mowing 

· Bank fees

· Pest Control

·  Security Patrol fees

·  Bookkeeping/Secretarial Fees

·  Maintenance and repairs

· End of lease cleaning costs

· Letting agent fees, including marketing 

A handbag

If you use a bag for work purposes – e.g. to carry iPads, phones, calculators, stationary or anything else you need for work, you can claim a deduction for the cost of the bag. Be careful though; the handbag needs to be fit for work purposes and actually used for work purposes. You might struggle to claim that new Gucci bag but a more modest bag – genuinely used only for work purposes – should be claimable. For men, a work briefcase, satchel or backpack should also be claimable.

Travel

If you travel as part of your work, you can claim the costs of your work-related journeys such as the cost of visiting clients or suppliers. If you use your own car, either claim 78 cents per kilometre up to a maximum 5,000 kms or keep a logbook and claim your actual expenses. You can also claim for parking, tolls and public transport if you don’t use your car.

What are the rules around the tax cut off (who has to submit by October 31 and why)? 

“Tax law says that the latest date for self-lodgers to get their tax returns in to the ATO is 31st October 2023. If you lodge after that date, you run the risk of incurring a late lodgement penalty. 

In addition, for businesses, the Quarter 1 BAS due date is coming up on the 28th October 2023.”

What happens if you miss said cut off? Is it common for people to be hit with late penalties? 

“Self-lodgers who fail to lodge a tax return by 31 October could be hit with an immediate late lodgement penalty of $313, increasing by a further $313 for each successive 28 day period that the return remains outstanding, up to a maximum of $1565. If you still fail to lodge once the maximum penalty is reached, the ATO can issue you with a default assessment (in effect, an estimate of what the ATO thinks your income is) or they can prosecute you. The ATO won’t generally impose a penalty if you are due a refund of tax.

Businesses who don’t get their BAS in on time also face a failure to lodge penalty which is line with the penalty for not lodging a tax return ($313 for each period of 28 days (or part thereof) that the return or statement is overdue, up to a maximum of $1565)”

For those who have been putting off their tax return, what are some tips you can offer about seamlessly completing this task? 

“With only a few days left to go, you might well be feeling the pressure if you haven’t yet started your return. My key tip is that you should really be considering using a tax agent (such as H&R Block), particularly if you have been deterred from completing your return so far by the complexity of the task. 

Taxpayers who use a tax agent can usually lodge well beyond that deadline without penalty. The ATO gives tax agents concessional extended deadlines which mean that they can lodge returns on behalf of clients up to 15 May 2024 without incurring any penalty.

Generally speaking, around 70% of taxpayers use a tax agent, a figure that rises to over 95% for small business owners. If you are entitled (or believe you are entitled) to claim deductions, either for your business or as part of your job, it makes sense to get an expert to prepare your return in order to ensure that you claim all the deductions you are entitled to.

If you think you may not be able to meet the 31 October deadline, you should now be giving serious thought to visiting a tax agent. You MUST be registered with the agent by 31 October in order to benefit from the extended deadline.

For businesses, the best advice is don’t bury your head in the sand in the run up to the BAS deadline. Keep your books and records up to date and the BAS process will be straightforward and you’ll have the necessary oversight of the financial side of your business. Don’t neglect your bookkeeping – not only will you struggle to complete your BAS, you also won’t understand your businesses profitability and its cash flow position. Use a tax or BAS agent like H&R Block to complete your BAS. Not only will they make the process of lodging a BAS easier, but you’ll also have more time to lodge.

For more information about lodgement, visit: https://www.hrblock.com.au/business-services/small-business/  to book an appointment with your local office for a faster refund.”

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