The 2021 financial year has been one of unprecedented change for tax professionals and their clients.
This year saw government relief packages and tax incentives continue to support businesses through COVID-19, with much of Australia’s workforce working from home. There’s also been a surge in Australian’s investing in cryptocurrency for the first time, as both businesses and individuals diversify their investments.
Navigating the tax implications of these changes means that tax time this year will be extra challenging for many of your clients, who will likely seek your assistance.
So what are the key tax considerations you can help your clients with this tax time? Here we explore four of the most critical:
1. Claiming tax deductions for work-related expenses
The ATO has put taxpayers on notice, declaring that it will be on the lookout for unusually high work-related claims this tax time, particularly those related to car or travel expenses.
“We know many people started working from home during COVID-19, so a jump in these claims is expected,” said ATO Assistant Commissioner Tim Loh. “But, if you are working at home, we would not expect to see claims for travelling between worksites, laundering uniforms or business trips.”
As a tax professional, it’s important to ensure your clients are aware of the ATO’s increased vigilance this year, and that they understand what expenses they can claim.
2. Declaring income from cryptocurrencies
The ATO has declared it will be cracking down on income derived from cryptocurrencies.
Since the beginning of 2020, ATO data shows that more than 600,000 Australian taxpayers have invested in crypto assets. The surge in investment has caught the attention of the ATO as many taxpayers believe their cryptocurrency gains are tax-free or only taxable when their holdings are cashed into Australian dollars.
It’s likely some of your clients have made such investments throughout the financial year, so it’s important to ensure they are aware of their tax obligations.
In late May, the ATO sent a written warning to about 100,000 taxpayers to alert them of their tax obligations. Assistant Commissioner Tim Loh says the ATO is well-aware of the mistakes many make in failing to declare cryptocurrency income, and that those who do so are in its sights.
“We are alarmed some taxpayers think the anonymity of cryptocurrencies provides a licence to ignore their tax obligations,” said Mr Loh.
“While it appears cryptocurrency operates in an anonymous digital world, we closely track where it interacts with the real world through data from banks, financial institutions, and cryptocurrency online exchanges to follow the money back to the taxpayer.”
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3. Tax depreciation incentives for businesses
It’s likely some of your business clients will be looking for support in navigating the tax depreciation measures introduced in response to the COVID-19 pandemic. This includes temporary full expensing, the loss carry-back offset, and the backing business investment – accelerated deprecation initiative.
Given the complexity of navigating these measures, and the ATO’s declaration that it will be closely monitoring their application, your guidance will be highly valued.
4. Declaring JobKeeper payments
When the JobKeeper scheme was rolled out last year, many businesses faced the challenge of quickly understanding its requirements. Therefore, some of your business clients that received JobKeeper may not be aware that the payments are taxable and must be included in their tax return.
As their accountant, these clients will be looking to you for guidance to ensure they are properly declaring their JobKeeper payments, to avoid underreporting income, and possibly incurring penalties.
As part of the effort to ensure correct reporting of JobKeeper payments, the ATO will be contacting businesses, or their registered tax agent, in early July to inform them about:
- The total amount of JobKeeper payments their entity received since 1 July 2020, or where they can find out
- Where to report JobKeeper payments in their tax return.
In addition to this communication, the ATO will prefill JobKeeper data as information only into tax returns to help prevent underreporting. Clients and their tax agents will need to review this information and include the total JobKeeper amount with the business income when completing the income tax return.
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