The following tax tips are only guidelines. Here are some main points
you need to consider, while not exhaustive, when you are preparing your
income tax returns for the 2007/08 financial year: Record keeping
- Records are normally required to be retained for tax purposes for at
least 5 years, but special requirements apply in some areas. For
example, in case of capital gains tax and the substantiation rules,
records have to be held for longer period. Work-related expenses
- ATO compliance program for 2008 focuses on over-claiming of
employee’s work-related expenses. Such expenses typically include
employee clams for expenditure incurred on items such as travel,
uniforms, subscriptions and self-education. Rental properties
- The types of things the ATO looks out for are repairs versus
improvements, ensuring the property was really a rental property and not
just your weekender and that interest on any property loans has been
correctly claimed. Dividends and interest - To ensure
that interest and dividends are correctly declared by taxpayers, the
Tax Office matches information provided in tax returns with information
from external sources. The best way to avoid trouble here is to include
all such income in your return and retain supporting documents such as
bank and company dividend statements. Capital gains -
In 2008 ATO compliance program, ATO will closely scrutinise asset
transactions. In particular, it has expanded its data matching projects
to ensure that there is no underreporting of capital gains as it now has
access to data on asset sales from state title and revenue offices,
securities exchanges and share registries as well as reports from
managed funds. Therefore, you should keep all relevant records to
support the details provided in your return. Aggressive tax planning
- Taxpayers should continue to be cautious about year-end tax schemes,
and carefully consider all the information in the market on this type of
higher-risk investment. This includes product rulings and taxpayer
alerts issued by the Tax Office. Salary packaging and fringe benefits
- This can be a useful way to obtain some tax savings, particularly if
you are on the top marginal tax rate and your employer offers it. Family tax benefit
- FTB is available to eligible families (including sole parents) with
children. You can claim the FTB as a direct payment from Centrelink or
as a lump via your tax return or periodically through reduced PAYG
withholding payments. Rebates - Tax rebates or offsets can reduce your tax bill, so it pays to know what you are entitled to. Stocktake
- Each year you need to include a value in your accounts of stock in
hand and work-in-progress at 30 June. Closing stock can be valued at
cost, replacement or market value or less if obsolete, but you have to
document which method you use. Company loans - It is
important to ensure that private company loans that extend beyond the
end of the income year are properly documented, to ensure that a tax
liability is not triggered under the tax rules set out under Division
7A. Adequate annual repayments of a properly documented loan are also
required. Bad debts - Consider writing off any bad debts prior to year end. Review your assets
- It’s too easy to carry assets on your books that have no real value,
are obsolete or have been scrapped. The only way to get a write-off
deduction for them is to review your asset register and take necessary
action before June 30. Superannuation - Employers must ensure they have made
sufficient superannuation contributions currently 9% for all of their
employees on a quarterly basis throughout the financial year to avoid
the risk of incurring a penalty under the superannuation Guarantee
Charge (SGC) regime. Eligible superannuation contributions for the June
quarter must be paid by 30 June 2008 to be tax deductible. Personal services income (PSI)
- The PSI measures are designed to limit the level of deductions
available to certain contractors, whether they are operating as a sole
trader or through a company, trust or partnership, and to also extend
the PAYG withholding rules in such cases. A taxpayer that meets certain
specified tests such as the “results” test will be treated as carrying
on a personal services business and will be able to claim wider range of
deductions. But such taxpayers need to be aware of the Tax Office’s
strict approach to income retention and income splitting. Non-commercial losses
- For a business to be commercial under these rules, it needs to meet
certain prescribed tests. If the tests are not met, any losses arising
from the activities will have to be carried forward and offset in a year
later, against future income of the same type or source. |