Are you on tax office's radar?

EVERY year the tax department publishes an annual ‘hit-list’ of issues they plan to look closely at in the coming year.

To give you a sporting chance, the tax department outlines ways they will be dealing with those areas so individuals and businesses have the opportunity to make sure they are totally honest in their reporting.

The list has recently been released for the 2010/2011 tax period.

For individual taxpayers, the following issues need to be considered.

Pre-filling

The tax department has, for a number of years, made the information it holds about your income available online. So information such as bank interest, dividends and Centrelink payments can be accessed.

This information is the basis of the government’s plan to simplify tax returns for individual taxpayers (does that sound exciting?)

Unfortunately, the tax department will not guarantee that these amounts will be correct 100% of the time, so the warning is that you have to maintain your own records so you can check the tax department records.

Investors

Capital gains made by investors are also on the list this year.

Apparently some investors have failed to declare some capital gains from the sale of property and shares in the past.

As the tax department has access to the records from state revenue offices and share registries, they are able to simply cross reference this information with the relevant income tax returns to identify any undeclared amounts.

Work-related expenses

The most commonly claimed items for individuals are work-related expenses – in fact, many regard it as the most important part of any tax return.

This year, the tax department will be focusing on the travel expenses claimed by mechanics, engineers and teachers. The traps for you are:

Not having sufficient documentation to support travel claims;

Incorrect expense claims with regards to carrying heavy equipment; and Incorrectly claiming expenses when travelling between work and home.

They are also looking for taxpayers who incorrectly claim home office, mobile phone and internet expenses.

If you are paranoid and prepare your own return, it may be worthwhile looking up the occupational-specific guides for your industry regarding work related expenses.

Illegally-accessed superannuation

There have been cases of people accessing their superannuation early, whether by using the services of a promoter or otherwise.

However, strict rules apply to the preservation of superannuation savings and early withdrawal is only available in limited circumstances such as:

  • Terminal medical conditions
  • Permanent
  • incapacity
  • Severe financial hardship
  • Benefits illegally accessed will be taxed at the marginal tax rate
  • Super contribution deductions

The tax department will match data from superannuation funds to deduction claims on your return.

The circumstances allowing deductions for contributions are quite limited, and you need to be aware of these guidelines before claiming.

Next time I will outline the tax department’s focus for small to medium business.



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