The ATO is taking a tougher approach on businesses in the 2022 financial year. There was leniency in 2021, offering businesses payment arrangements, deferrals of lodgements, remission of penalties and general interest charges.
Many taxpayers have found themselves in a difficult financial situation as a result of lockdowns and border closures.
However, in 2022 as we move toward a stronger economy, and low unemployment the ATO will be focussing on debt collection and following up on outstanding lodgements.
Check out some expert tips to help get you through the past financial 2021 year and the current 2022 financial year.
1. Make sure you can prove your deductions.
Only claim for costs that you can prove with a receipt, invoice or bank statement.
If you are a self-lodger using the ATO’s online myTax program, these will be checked in detail.
Common errors include claiming for;
– Home to work travel
– Non-work clothing
– Other private or domestic expenses
If your deduction claims are found to be incorrect, you will be required to pay the tax avoided. If necessary, you will also be charged an interest component of approximately 9% per annum. If you are deemed to have acted carelessly in your reporting a further penalty of approximately 25% to 95% of your tax avoided may be charged.
2. Capital Gains and Losses
If you have made a capital gain in the last financial year, you will need to pay tax on the asset. In relation to calculating your capital gain, you should seek appropriate tax advice. This is to ensure that the cost bas is correct. It will also help by reducing the capital gains by capital losses that occur in the same year or an earlier year.
Capital gains tax is reduced to 50% if you hold the asset for more than a year.
3. Pandemic Claims
There are some additional expenses that you can claim thanks to Covid-19. These include working from home using the ATO’s 80 cents per hour rate or 52 cents per hour rate on actual costs. The claim of 80 cents for each hour you work from home covers all expenses. These include – phone, internet, the decline in value of computer equipment and furniture, electricity and gas for heating, cooling and lighting.
Alternatively, if you use the 52 cents per hour method, it still applies for each hour of work at home. It does not include phone, internet, depreciation of computer equipment. It should be noted that you can claim these separately to make the latter a better option in some cases.
Finally, you can use the actual costs method for work from home deductions. This option may result in a higher deduction however you will need to retain proof of expenditure such as gas and electricity, cleaning, phone, internet, computer and office equipment. There may be other tax considerations if you are using your home to operate a business.
Are you a Perth small business that needs help with their tax return? Aspect Accountants and Advisors in West Perth can help ensure you get the best tax return for your hard-earned money without the risk of incurring ATO penalties for getting it wrong.
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