ATO Doubles Rental Deduction Audits

In the 2017-18 financial year, more than 2.2 million Australians claimed over $47 billon in deductions and the Australian Taxation Office (ATO) thinks that is too much – one in ten is estimated to contain errors.

4,500 audits of rental property deductions will be undertaken this year with the focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing. Deliberate cases of over-claiming are treated harshly with penalties of up to 75% of the claim.  In one case exposed by the ATO, a taxpayer had to pay back $12,000 in claims for deductions against a holiday home that was not genuinely available for rent and was blocked out during the holiday season. In another, a taxpayer paid back $5,500 because they had not apportioned their rental interest deduction to account for redraws on their investment loan to pay for living expenses.

Please contact us you have any concerns about an ATO audit or wish to discuss your deductions.

Warning on ATO and Medicare scams

Recently we’ve been contacted by a number of clients who have received suspicious calls and messages from people claiming to be from the Australian Taxation Office (ATO) and Medicare.  It’s important that you are aware of some recent scams.

Tax scams

The Australian Taxation Office (ATO) has warned about the emergence of a scam where “…scammers are using an ATO number to send fraudulent SMS messages to taxpayers asking them to click on a link and hand over their personal details in order to obtain a refund.”

The refund scam follows a more sinister four phase scam stating there is a warrant out for your arrest for unpaid taxes in prior years. The scam starts with a text message purportedly from the Australian Federal Police (AFP). Within minutes, your mobile rings and the caller identifies themselves as being from the AFP and working with the ATO. They then ask for your accountant’s details. You then receive a call purportedly from your ‘accounting firm’ asking you to verify the AFP/ATO claims. Finally, you are provided with a way, if you act quickly, to make the AFP go away by paying a fee before your ‘imminent arrest’.

The ATO states that it will not:

• Send you an email or SMS asking you to click on a link to provide login, personal or financial information, or to download a file or open an attachment.
• Use aggressive or rude behaviour, or threaten you with arrest, jail or deportation.
• Request payment of a debt via iTunes or Google Play cards, pre-paid Visa cards, cryptocurrency or direct credit to a personal bank account, or
• Request a fee in order to release a refund owed to you.

Medicare Scam

A new phishing scam sent text messages purportedly from Medicare advising the recipient that they are owed a $200 rebate from Medicare. Once the person clicks on the reclaim link, they are asked to provide their personal details including bank account details for the ‘rebate.’

If you are uncertain about any suspicious messages please contact the registered office of the “sender” or alternatively speak with your accountant or advisor.

The realities of the ‘contractor vs employee’ debate: Where do you stand?

If you ask a worker why they think of themselves as a contractor instead of an employee, you may hear answers such as “I have an ABN”, “I have a special skill” or “Not all my work is for the one guy”.

And what if you asked the business owner or employer why they’re classifying the new person on their team as a contractor rather than an employee? They may tell you “He pays his own superannuation”, “He wants to be a contractor” or even “We always use contractors”.

Now these people may well be acting in good faith rather than deliberately trying to ‘cheat’ the system, but the Australian Taxation Office (ATO) may consider these ‘contractors’ to be employees after all.

And it’s not just the ATO you need to worry about. There are also work cover and payroll tax requirements that you need to keep in mind.

To find out more about the WHY realities in the employee/contractor debate, contact PrimeAdvisory or download the checklist of WHYs you need to address.