Tax Update

Tax cuts

The Government has announced that more than 10 million Australians will receive immediate tax relief following the passage of legislation through the Parliament, which increases the top threshold for the 19% tax rate from $41,000 to $45,000 and increases the low income tax offset from $645 to $700 in 2022/23.

In combination with the legislated removal of the 37% tax bracket in 2024/25, the Government is also "delivering structural reform to the tax system" by reducing the 32.5% tax rate to 30%.

Low and middle income tax offset

In addition, from the 2018/19 income year (i.e., last income year) the low and middle income tax offset ('LAMITO') has been increased from a maximum amount of $530 to $1,080 per annum and the base amount increased from $200 to $255 per annum.

Taxpayers with a taxable income:

  • of $37,000 or below can now receive a LAMITO of up to $255.

  • above $37,000 and below $48,001 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080

  • above $48,000 and below $90,001 are now eligible for the maximum LAMITO of $1,080; and

  • above $90,000 but is no more than $126,000 are now eligible for a LAMITO of $1,080, less an amount equal to 3% of the excess.

The ATO is implementing the necessary system changes so taxpayers that have already lodged their 2018/19 tax return will receive any increase to the LAMITO they are entitled to (any tax refund should be deposited in the taxpayer's nominated bank account). There will not be any need to request an amendment.

Those who are yet to lodge their tax return will have any offset they are entitled to taken into account during the normal processing of their return.

ATO focus on work-related car expenses

The ATO is making work-related car expenses a key focus again during Tax Time 2019.

Assistant Commissioner Karen Foat said over 3.6 million people made a work-related car expense claim in 2017/18, totalling more than $7.2 billion. “We are still concerned that some taxpayers aren’t getting the message that over-claiming will be detected and if it is deliberate, penalties will apply,” she said.

 “While some people do make legitimate mistakes, we are concerned that many people are deliberately making dodgy claims in order to get a bigger refund. We see taxpayers claiming for things like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed them for.”

 One in five car claims are exactly at the maximum limit that doesn’t require receipts. Under the cents per kilometre method, taxpayers don’t need to keep receipts, but they do need to be able to demonstrate how they worked out the number of kilometres they travelled for work purposes.

 The ATO’s sophisticated analytics compares taxpayer claims with others earning similar amounts in similar jobs. Where the ATO identifies questionable claims, they will contact taxpayers and ask them to show how they have calculated their claim, and in some cases the ATO may even contact employers to confirm whether a taxpayer was required to use their own car for work-related travel.

The ATO’s sophisticated data analytics found a range of unsupported claims in 2018, including:

  • when the ATO asked a taxpayer to provide the logbook to support a claim of $4,800, they found the taxpayer was referring to a car service logbook rather than a logbook kept for calculating their work use car percentage (the taxpayer had not undertaken any work-related car travel during the year).

  • another claim was flagged by the ATO's analytics indicating a taxpayer, a retail worker, had incorrectly claimed $350 for the cost of public transport to and from work.

  • the ATO also identified an office worker claiming $3,300 for 5000 kilometres of work-related travel using the cents per kilometre method, but it turned out the taxpayer's claim was based on trips he made from home to work.

Super guarantee compliance

The ATO will send more proactive warnings to employers who aren’t complying with their Superannuation Guarantee obligations under an enforcement technique enabled by the use of Single Touch Payroll (STP) by employers.

The ATO recently contacted a small sample of 85 employers identified as not having paid Superannuation Guarantee to their employees per quarter as required. Following contact some 50% of these employers then lodged and paid the outstanding SG to the ATO for their employees.

The ATO have stated they intend to expand this approach to those employers who haven't paid SG to their employees within 30 days after the end of the reporting quarter.

We’d encourage all clients who might have an outstanding balance or are unsure of their obligations to get in touch today 9584 2277.

Removing tax deductibility of non-compliant payments

From 1 July 2019 businesses can only claim deductions for payments made to workers (employees or contractors) where you have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.

  • If the PAYG withholding rules require you to withhold an amount from a payment you make to a worker, you must:

  • withhold the amount from the payment before you pay it to them; and

  • report the amount to the ATO

 Any payments made to a worker where the business hasn't withheld or reported the PAYG amounts are defined by the ATO as non-compliant payments. Businesses are unable to claim a deduction if you are required to withhold an amount and you don't withhold or report any amount to the ATO.

If you make a mistake and withhold or report an incorrect amount, you won't lose your deduction. You still need to correct your mistake as soon as possible to minimise any penalties. You won't lose your deduction for failing to report payments on a Taxable payments annual report (TPAR) or a payment summary annual report (PSAR).

Scammers impersonate ATO phone numbers

The ATO is warning that scammers have adopted ‘Robocall’ technology to target taxpayers across the country. 

Assistant Commissioner Gavin Siebert said: 

“Scammers are sending pre-recorded messages in record numbers and are manipulating caller identification so that your phone displays a legitimate ATO phone number despite coming from an overseas scammer”. 

“If the scammers do make contact, they will request payment of a tax debt – usually through unusual methods like bitcoin, gift cards and vouchers. Legitimate ways to pay your tax debt are listed on our website. The scammers will threaten you with immediate arrest, attempt to keep you on the line until payment is made and may become rude or aggressive.” 

The technique of displaying misleading phone numbers is known as “spoofing” and is commonly used by scammers in an attempt to make their interactions with taxpayers appear legitimate.