7 June 2019

With the end of the financial year fast approaching, some taxpayers are turning their mind to organising themselves in preparation for lodging their 2019 tax return early in July.

We understand there is a strong incentive to lodge early to get your hands on some extra cash courtesy of our tax system if a refund is expected. We want to remind taxpayers that there are added complexities in lodging early, particularly this year due to two new factors at play.

Firstly, Parliament needs to pass the announced increase in the low and middle income offset which applies for the 2019 income year. Eligible taxpayers can receive up to an extra $530 for singles or $1,080 for a couple. The ATO has stated that it cannot process the higher amount until the law is passed but will be able to automatically amend a return if the law changes after a taxpayer receives their assessment.

Secondly, single touch payroll has come into operation. Some employers no longer need to provide a payment summary to employees as this information can now be accessed via myGov. The information available in early July may not be accurate until the employer completes a finalisation process. Until this happens employment income will show a notation “tax not ready”.

Consistent with prior years, third party data such as dividends, interest, share disposals etc. is progressively uploaded onto the ATO systems during the month so it normally takes some time for the pre-fill information to be finalised. The ATO has the right to auto-amend a return which it has been doing for discrepancies, but interest and penalties can be applied by the ATO.

Our advice is that unless you have certainty and completeness around the information used to finalise your return, we are encouraging all taxpayers to rethink lodging returns early this year especially in light of the above changes.

Lastly, and more importantly, work related deductions (WRE) has been a focus area which has come under more scrutiny. The tax gap for individuals of $8.7 billion has been largely caused by overstatement of WRE. Random audits have revealed high error rates from both agent and non-tax agent returns. The ATO will be using tools such as data analytics to highlight possible over-claiming.

Taxpayers need to be constantly reminded that our tax system relies on self-assessment so the buck stops with the taxpayer. Some 70 per cent of the population seek the services of a trusted professional for assistance in navigating their way through the tax return process. Tax can be complex depending on personal circumstances so if you are unsure of your obligations professional help is recommended.