The tax filing season is upon us. With ease in restrictions from COVID-19 lockdown, individuals and businesses are keen to lodge tax returns as early as possible and get some financial momentum in the coming months. Almost every registered tax agent is getting ready for the busy season ahead. Mr. Jatin Savalia, tax accountant at McFillins & Partners Accountants, breaks down on what to expect this year.
To begin with, one must be aware of their current situation. For example, if an individual has worked for the first time and is under 18 years old, that person would be taxed differently as compared to an adult working full-time. Their income can be classified as “excepted income” or they can be classified as “excepted person”.
In another situation, if someone has arrived in Australian who is not an Australian Citizen or a Permanent Resident, stayed within the country for less than 183 days, and worked within the country, they will be treated as non-residents for tax purposes, and may not be liable to pay any “Medicare Levy Charges”. Apart from these, there are a number of rules regarding what can be claimed and cannot be claimed as deduction for work.
Australian Taxation Office has specified time frames for lodging tax returns. Individuals lodging it themselves need to have their tax return submitted by 31 October, 2020. If they are lodging through a registered tax agent, they can generally get an extension of this deadline to 15th May next year. In order to get the extension, individuals need to be on the relevant tax agent’s client listing, registered with the ATO, before the due date.
Technically, one can file a tax return from the 1st of July. However, there are a number of factors that need to be considered before an individual should go ahead. Information such as income from all sources like interest received from bank account and term deposits, foreign income received (to be reported by Australian Citizen and Permanent Residents), passive sources of income like income generated from rental property, and hobby businesses – are not always readily available and takes some more time to be updated. In this case, lodging a tax return through a registered tax agent is in your interest.
Generally, the lodgements dates are the same each year for Individuals. Individual tax returns need to be lodged by 15th May, 2021, provided they are lodged through a registered tax agent.
The lodgement and payment date for small companies is 28th February, 2021. If you have any prior-year returns outstanding, the due date for those returns will be 31st October, 2020. Similar to individual returns, companies also get an extension up to 15th May if returns are done by a registered tax agent. Similar extension to lodge tax return can be accessed by the client for Trusts, Partnerships, and SMSF’s, provided they are on the client list of a registered tax agent.
If there are any outstanding prior year returns, the lodgement deadline for the current year reverts to 31st October, 2020.Apart from these, an individual could potentially get an extension if they are in any unforeseen situations through the help of a tax agent.
We expect here will be a shift away from traditional meetings in our office to prepare and review and sign off on tax returns with our clients. Instead, online video meetings using platforms such as Zoom will be more popular for meetings, with people more likely to sign off on their tax returns electronically now than ever before.
Instant Asset Write-off: The Instant Asset Write-Off for small businesses has increased. Small businesses will now be able to write off eligible assets that cost less than $150,000 and were acquired after 12th March, 2020. The new write off threshold will remain in place until 31st December, 2020.
Cash-Flow Boost for Business: Temporary cash flow boosts have been provided to support small and medium businesses and not-for-profit organisations to help them during the economic downturn associated with COVID-19. Eligible businesses and not-for-profit (NFP) organisations who employ staff will receive between $20,000 to $100,000 in cash flow boost amounts – by lodging their activity statements between the months (or quarters depending on the BAS cycle) of March and September 2020.
Cash flow boost payments will be exempt for income tax purposes. However, businesses receiving JobKeeper payments will need to keep in mind that these payments are taxable and form part of their income for tax purposes.
The major change for Individual tax returns relates to claiming home office expenses. The ATO has declared a higher rate for home office deduction from 1st March, 2020 to 30th June, 2020. Home office expenses were previously claimed at 52 cents per hour and this was deemed to cover costs like depreciation of furniture, electricity, water bills, body corporate fees, etc. As per the guidelines, the home office expenses can now be claimed through cents per hour method, at the higher rate of 80c per hour from 1st March, 2020, provided they can prove that they were required to work from home. However, this will be a ‘’catch all” claim which covers electricity, phone, internet and equipment usage related to the home office.
Individual still can’t claim expenses for travelling to and from work in the COVID-19 if they are required to work from home as it still constitutes to be regular travel.
Lodging online can be simple in the right circumstances, especially if their affairs are relatively simple. However, it can often be risky if the person lodging doesn’t have a thorough understanding of what income they need to report, what deductions they can claim, and rules written into Australia’s Tax legislation. First-timers may find it more prudent to lodge via a tax agent in the first year, so they can get an understanding of these items and can always look at lodging online in future years, if they feel comfortable doing so.
McFillin and Partners Accountants is a Brisbane-based practice consisting of experienced CPAs and staff in all fields including taxation accounting, general accounting, management accounting, bookkeeping, financial planning and superannuation. McFillin and Partners are a Platinum Partner with XERO accounting software and are XERO certified accountants. All of our accounting staff are either certified accountants or en-route to be certified accountants.
Between the three partners alone, there is over 50 years of public practice accounting experience. At McFillin and Partners, constant training session are conducted to deliver the best possible outcome for our clients. These constant training session are conducted every month, where a set of staff (one junior and one senior accountant) are required to do a detailed research and presentation of different topic like Fringe Benefit Tax, Capital Gains Tax, and more. These training session help keep us up to date with the most current updated for tax and compliance.