Misunderstandings About Tax Returns

Tax declaration may be a cumbersome task. However, at the end of the fiscal year, business owners all focus on this matter in order to obtain the maximum tax refund. ATO’s Assistant Commissioner Karen Foat explained that last year, because most people were confused by the Australian Taxation Office’s so-called “misunderstanding of the time to declare a tax refund,” nearly 500,000 individual tax returns must be revised. 

Every year, when this “misunderstanding” unfortunately occurs, it is only in the process of processing the return request for tax refund that we realize that this often leads to a delay in the re-submission; if it is fully prepared at the beginning and does not need to be modified, it may be produce unexpected results. 

When submitting the 2019-20 tax return, please pay attention to the following principles: 

1. Early submission of tax forms does not mean early tax refund

Contrary to some tax proposals made by the Australian Treasury Secretary (Josh Frydenberg) last year, early birds may not necessarily receive tax opportunities. As explained by the ATO, the pre-fill to simplify the process is usually not completed until the end of July. 

The ATO stated that it is very important to ensure that all the information is included before the information is automatically submitted because the missing income will slow down the review of the declaration. 

What is pre-filled information? (Pre-fill information) 

“In order to save the time to fill out and correctly obtain the tax return, ATO usually obtains information from the health funds, banks, employers and government agencies associated with individuals.” (ATO) 

  • Government agencies 
  • Private health funds 
  • Financial institutions (interest income) 
  • Companies (dividend income) 

You can start tax declaration through myTax or a registered tax agent, or verify the correctness of your personal information through the website link above. 

(It is worth noting that the above link does not contain information about your employer. Before making a tax declaration, please confirm whether your employer and all other sources of income are included). 

Please do not just submit the pre-filled information, there may be a lot of missing or incomplete information!

2. You are not allowed to declare transportation expenses to and from home and workplace

Unless you are carrying large work tools or equipment and are not allowed to place them in the office due to unsafe reasons, you may not declare the cost of the journey between residence and work. 

Even if you regularly go to the office during the COVID-19 period, you cannot declare the travel expenses if you work from home at other times. 

Under normal circumstances, the journey between home and work is considered a private journey. But in some cases, you can apply for tax relief: 

  • Driving to and from different workplaces on the same day, such as moving from an office workplace to a second workplace. 
  • Driving to and from different workplaces of the same employer on the same day, such as going to another office to attend a meeting of the same employer. 

In the following cases, you cannot claim a reduction or exemption of expenses between your personal residence and your workplace: your residence is far away from your usual workplace, or you must work outside of normal working hours, such as working late to communicate with colleagues in other time zones. 

In limited circumstances, you can declare a reduction in the cost of traveling to and from your personal residence and workplace. For example, if you carry large work tools or equipment, such as a large and heavy file box full of materials needed to attend a meeting. The cost of these trips is deductible only in the following cases: 

  • Work equipment that your employer requires you to transport 
  • Equipment essential for earning income 
  • There is no safe area to store the equipment in the workplace, and 
  • The equipment is bulky, weighing at least 20 kg, or it is troublesome to transport. 

If you declare a reduction in car expenses, you need to keep a driving log to determine the percentage of work-related expenses, or if you use the kilometers calculation method to apply for tax relief, you need to provide the Australian Taxation Office (ATO) with reasonable calculations related to work distance. 

3. Double declaration of fees is actually illegal 

Due to the COVID-19 pandemic, many people are working from home this year. The ATO introduced a shortcut to help taxpayers. This method allows remote workers to receive a uniform deduction of 80 cents per hour. If you have already taken this approach, you cannot attempt to separately declare items related to work at home (such as laptops) to achieve a second tax declaration. 

80 cents calculation method: 

The Australian Taxation Office (ATO) has introduced a new calculation method, where people calculate all daily expenses in the form of 80 cents per hour, without the need to calculate each expenditure of specific daily expenses. 

This simple method of calculating tax rebates is applicable from March 1 to June 30. After that, it will be reviewed and decided by the Australian Taxation Office as the epidemic progresses. 

“If you choose to use this quick and easy way, all you need to do is to record the time you work at home as evidence,” said Karen Foat, assistant commissioner of the tax bureau. 

4. Work-related expenses must be related to it 

This is easy to explain: only expenses directly related to income are considered “work-related.” Thankfully, this includes personal protective equipment and hand sanitizer for taxpayers who need to make physical contact with customers. 

If it is necessary to purchase protective equipment required for work during bushfires or epidemics, the cost of protective equipment can be deducted on the tax return. 

Taxpayers who are engaged in close contact with customers or close contact with customers during the period of Xinguan, if they have already paid for protective clothing, gloves, masks, disinfectants or antibacterial sprays, can deduct this cost from the total tax revenue . 

This includes industries such as healthcare, retail, and hospitality. 

Foat said that it is important to comply with the three golden rules when filing a tax return: the taxpayer must have already spent the money and has not been reimbursed. The cost must be directly related to earning income, and there must be a record to prove this. 

5. You cannot guess these deductions out of thin air

Although the ATO has a declaration requirement that allows taxpayers to declare a fee of A$300 without a receipt, this does not mean that it can be obtained as long as the declaration is required. The tax return ultimately requires evidence to prove the declaration of expenses. 

ATO believes that a reasonable cleaning fee for work uniforms is $1 per batch, but if other clothes are included, it is 50 points. 

Senior tax manager Liz Russel gave several ways to supplement the vouchers that lack common expenses for receipts: 

  • List membership or union fees in your pay-as-you-go (PAYG) summary; 
  • Fuel and gasoline usage, as long as you can show the mileage related to work; 
  • Computer items, if you have a credit card statement, you can show this expenditure, or you can take a photo of the product packaging as proof; 
  • Stationery, if you have a credit card statement, you can show this expenditure. 

ATO can also accept bank statements and BPay statements as proof of tax reduction declaration. 

Find out more about our BAS Agent Registration Skill Set Course (RTO: No 45225).
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Source: ato.gov.au, 9News

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