The Past Year May Have Pushed You Over The Tax-Free Threshold – Here’s Why

Did you know that, regardless of how many jobs you worked over the past year, once your income reaches $18,200 it has crossed the tax-free threshold?

 

The tax-free threshold is the maximum amount of income that you can earn in a year without having to pay any tax.  Currently, that limit is set to $18,200.

Did you also know that payments from the government could also be counted as taxable income, which contributes to your tax-free threshold?

The previous year has not been without challenge for many Australians, who may have faced difficult issues with maintaining employment during business shutdowns or disasters, and required supplemental income (such as payments from Centrelink, government support or disaster relief).

Those payments may have pushed you over the $18,200 threshold without you realising. This will create an issue particularly if you failed to elect to have tax withheld from the payments.

This could impact the amount of money that you might otherwise receive from your tax return claim, as it could push you into a different income bracket for your return.

Centrelink payments, disaster relief payments and government support packages may be considered as taxable income. This, on top of what you may have earned during employment, is what the ATO will consider when calculating your tax return claim.

Want to get the most out of your tax return for this upcoming financial year? Speak with us so that we can advise you on deductions, your income and other queries you might have that we could help with.

Don’t Get Stung! You May Need To Pay Extra Tax On These Relief/Support Payments.

Have you, over the course of the past financial year, received a government assistance payment, support payment or disaster relief supplement?

There have been a number of cases where people who received financial assistance from the government were hit with additional owed tax to the ATO, due to their payments increasing their income threshold.

When lodging your individual income tax return this year, you will need to declare certain Australian Government payments, pensions and allowances in your tax return. If you did not elect to pay tax on those payments, this could affect the payment received from your return (or mean that you actually owe money to the ATO).

Some of the taxable payments that you may need to include in your tax return include:

  • the age pension
  • carer payment
  • Austudy payment
  • JobSeeker payment
  • Youth allowance
  • Defence Force income support allowance (DFISA) where the pension, payment or allowance to which it relates is taxable
  • veteran payment
  • invalidity service pension, if you have reached age-pension age
  • disability support pension, if you have reached age-pension age
  • income support supplement
  • sickness allowance
  • parenting payment (partnered)
  • disaster recovery allowance (but not in relation to 2019–20 bushfires)

Most of these pensions, payments and allowances will pre-fill in your tax return if you lodge online. You will need to make sure that all information submitted is correct though. Verify the pre-filled information with your own records to ensure that you are lodging the right information, and not missing anything.

Do you have concerns about your tax return this year? Uncertain about deductions, or if certain taxes will apply to you? Want a little more help or information about your government payments?

Be prepared for your individual income tax return with a consult with us. We can advise you on your tax returns, and potentially help you minimise the tax you will end up paying.

Do You Need A Receipt For That Claim? ATO Cracks Down On Work-Related Expenses

The ATO is warning those submitting their tax returns this year to take care when submitting ‘other’ work-related deductions to claim back, as they are closely scrutinising. If you are planning on claiming work-related deductions this tax return season, you will need to show:

  • That the money that was spent was on yourself and was not reimbursed
  • That the expense was directly related to earning your income
  • That there is a written record of the amount being claimed

To ensure that you remain compliant with your tax obligations when claiming work-related expenses, you should ensure that you have access to all of the relevant information that you will need to prove that the amount being claimed is eligible as a deduction.

Here is a guide as to what we will require from you to prepare your income tax return. Please note that these documents may not apply or be needed by everyone.

Income

To prove income, you will need to give us evidence of the following:

  • Payment summaries for any jobs you have had over the past year
  • Bank interest statements showing interest received
  • Allowances
  • Dividend statements
  • Foreign income
  • Rental property income
  • Business income
  • Any other income earth

Work-Related Expenses 

You will need to provide us with documentary evidence of the following to claim these as deductions:

  • Motor vehicle expenses  (estimation of kilometres if no logbook is kept, otherwise logbook and expense details)
  • Travel (fares and accommodation)
  • Uniforms/work-wear
  • Self-education and professional development
  • Union fees, registrations, subscriptions, memberships
  • Home office costs
  • Telephone, computer, internet fees
  • Details of asset purchases (with the portion of personal and work usage)

Other Expenses

You will need to provide us with evidence of the following:

  • Income Protection Insurance
  • Investment expenses
  • Rental property expenses
  • Cost of maintaining tax affairs

You may also be able to claim a deduction for the expenses that are incurred while performing your work duties at home if you are a current employee working from home. You will also need to have accurate records, receipts and information irrespective of the method that you use to claim (Shortcut, Fixed Rate or Actual Cost).

Accurate record-keeping of all documentation regarding income, work-related expenses and other expenses will help expedite the process of lodging your tax return by us. If you require any additional information regarding what you need to provide in terms of documentation for your tax return, you can speak with us.

Tax Treatments Will Differ Depending On Payment Types, Says ATO

The ATO is looking to make tax season a little bit easier this year, particularly in light of the unique but significant challenges that Australians have been facing over the last year, and are continuing to face. If you received a financial assistance payment, grant or scheme package during the 2020 financial year, you need to be aware of your taxable requirements. There are different tax treatments for different payments that you may have received.

Jobkeeper

Payments that were received from Jobkeeper as an employee will be automatically included in your income statement as either salary and wages, or as an allowance. Sole traders who have received a Jobkeeper payment on behalf of their business will need to include the payment as assessable income for the business.

Jobseeker

All information will be included in your tax return (in the Government Payments & Allowances question) when ready. Lodging your return prior to the information being available will require you to add it yourself. Leaving out income will slow your return, so it is important to ensure that you have all of the information when lodging.

Stand Down Payments

If you were the recipient of a one-off or regular payment from your employer after being temporarily stood down due to COVID-19, these payments will be automatically included in your return as they are taxable.

COVID-19 Disaster Payment For People Affected By Restrictions

The Australian Government (through Services Australia) COVID-19 disaster payment for those who were affected by restrictions is a taxable payment. This must be included when lodging your tax return.

Tax Treatment Of Other Assistance Payments

The tax treatment of other assistance payments may vary according to what is required and how the income is assessed as. It is best to double-check on the ATO’s website directly to determine how different disaster payments may impact your return.

Early Access To Superannuation

If you received early access to your superannuation under the special arrangements resulting from COVID-19, you do not need to declare that amount in your tax return. Any eligible amounts withdrawn under this program are tax-free.

If you require assistance with determining what is taxable income and what is not, or you’re not sure what payments that you received may be applicable to the ATO’s different tax treatments, come speak with us. We’re here to help.

Gig Economy Workers Are Warned That The ATO Is Watching

The inexpensive and profitable side hustle is under the ATO’s watchful eye when it comes to declaring income this tax season. With many gig economy workers often earning their income as independent contractors, the ATO warns that a failure to report all income from all of the work that they carry out could land them with severe penalties. 

 

The ATO is expected to employ advanced data-matching from platforms that play host to large proportions of Australia’s gig economy to ensure that tax is declared and paid on the income from workers of the gig economy. Those workers may include Uber workers, Doordash, Lyft, Airbnb and many more similar side hustle income earners.

 

There is a silver lining for gig workers this tax time. Many gig economy workers may find themselves more eligible for tax deductions – but are warned against claiming more than they are allowed to.

 

Gig workers are eligible to claim deductions for most costs incurred while earning their income (such as travel or vehicle expenses, financing and marketing). These deductions, however, can only be claimed for the work-related proportion of the claim. You won’t be able to claim the whole amount for the deduction if the claim is made because you picked up an Uber fare on the way back from your Grandma’s for example, it will only be deductible from when you picked up your passenger. 

 

Those who prepare their deductions based on a representative period are also warned to prepare an additional record for this period, as the pandemic has induced numerous tax challenges for many gig economy workers involved in declining and rising fields of the economy. 

 

Workers who fail to declare cash income from the gig economy may incur penalties in the form of interest on their tax bills or potential criminal charges. It is vital that you ensure your tax return is correctly lodged and all income is declared if you are a gig economy worker of any kind. If you need assistance regarding your tax return lodgment process, you can always contact us for advice.

The Federal Budget 2021-22: Low & Middle Income Tax Asset Rebate Extension Announced

The Low and Middle Income Tax Offset has been extended for another 12 months, meaning that taxpayers whose wage earnings situate them within a certain income bracket will again be able to receive a little extra cash back into their pockets again this year

to receive a little extra cash back into their pockets again this year.
Tax offsets are also known as rebates and directly reduce the amount of tax payable on your taxable income. Sometimes, this can lead to the payable amount lowering to zero, but these rebates cannot be used on their own to get a refund.

You are only able to receive this amount after you have filed your tax return at the end of the financial year and in a lump sum amount that is in accordance with which wage bracket you are in and the amount you will receive. 

You don’t need to complete anything in your tax return for your low or low and middle-income tax offset to be worked out for you. Instead, the amount of tax offset you will receive is worked out for you once your tax return is lodged.

If you earn under $37,000 this financial year, you will receive an offset of $225. For those who earn between $37,001 and $48,000, you will receive $255, with an additional 7.5 cents to every dollar above $37,000 up to a max of $1,080.

Those who earn between $48,000 and $90,000 a year are set to get the best deal, with up to $1,080 on the cards.

If you have any tax-related questions that the Federal Budget announcements have brought to your attention, speak with us for assistance.

Using Feedback As A Tool For Your Business’s Growth

Feedback is an essential element within the business sphere. It can be used to improve your business as a whole or help identify where you may make further improvements. It can be internally or externally driven and may not always be positive.

Essentially, feedback is a driving force behind a business’ growth and should be sought out and given by you to create a direct line of communication that the feedback is being received and put back into the business.

It is crucial to consider the following when you ask for feedback:

Who you are requesting feedback from and why
How to use the feedback effectively after receiving it
How your business can improve as a result of the feedback
What is/isn’t working for your business, and how you can address it

You can request feedback from:

Those who report to you (you can go down a few levels)
Those above you (you can go up a few levels)
Colleges in the same team/group
Colleges in other teams/groups
Vendors, suppliers and external contractors
Customers

As a business owner, it is crucial that you receive honest and constructive feedback while also providing it to your employees. To do so, one needs to ensure that the feedback is:

As specific and as close as possible to an event
Given and received in a safe place in an appropriate setting and time
Not judgemental or personal
Constructive and actionable

When receiving feedback, try to listen, reflect and respond.

Listen

Listen to the feedback provided to you, even if it makes you want to react immediately to it. Delay defending yourself, and listen closely to what exactly is being said. Internalise the feedback, and ask questions to clarify what they are saying to give yourself a concrete understanding.

Reflect

After receiving feedback, reflect on what was said with an open mind and understand the context in which the feedback has come from. Is it helpful feedback that you can use to improve or change accordingly? Rather than think “that wasn’t my intention” about the feedback, consider how it could have been perceived differently from the other’s view.

Respond

Giving feedback, particularly when it is negative, can be a daunting task. Respond with a thank you to the feedback, as it promotes a positive response irrespective of the nature of the feedback.