The first question is whether you do your own return or not. Where a taxpayer lodges their tax return via a tax agent, an extension of time to lodge and pay may be available. This though is only the case if your previous returns are all in order. No time extension will be given if there are outstanding prior year returns.
Ordinarily, taxpayers are required to lodge their tax returns by 31 October following the 30 June year end, so PAYG employees should consider whether a lodgement extension is desirable in their particular circumstances.
The deferred lodgement due dates available for clients of tax agents are:
- 31 March 2020 if the taxpayer’s last lodged tax return resulted in a tax liability of $20,000 or more; or
- 15 May 2020.
Not only do you gain more time, but crucially professional expertise. Qualified tax agents have experience in dealing with the ATO. As outlined in the ATO’s Compliance Programme, they are aware of the audit focus areas. Tax agents are also aware of any current ATO questionnaires or notices and ATO data matching activity, and the impact that these have on the taxpayer. All taxpayers should seriously consider whether going it alone is a false economy.
But for those who have reasonably straightforward tax affairs and choose to do their own tax return, what are the main points that you need to be aware of?
Firstly, don’t be late!
Missing that 31 October deadline can give rise to late lodgement penalties. The second key item to note is the tax payment due date is three weeks after lodgement, i.e. 21 November 2019. Paying your tax liability late is likely to give rise to interest charges being imposed by the ATO.
Most taxpayers lodge their tax return online via myTax by linking a myGov account with the ATO. It is not mandatory but it can help streamline the process. If you are expecting a tax refund, lodging online should expedite receiving the money. The ATO usually issues tax refunds within 12 business days where the tax return is lodged online, or 50 business days where a paper return is lodged.
A change to note this year is that many employers will have reported through Single Touch Payroll (STP), which refers to direct payroll reporting to the ATO on a real-time basis. If your employer reported through STP in the 2018/19 tax year, you will not receive a PAYG payment summary. Instead, this information will be included in an employment income statement that should be readily available for you to access via your myGov account after 15 August 2019 once your employer has finalised their STP report for the year.
How can PAYG employees maximise the amount they get back in tax?
First, you no longer need to ‘salary sacrifice’ super contributions in order to reap tax savings. From 1 July 2017, all individuals under 75 years (including those aged 65 to 74 years who meet the work test) are eligible to claim a tax deduction for personal super contributions made into an eligible super fund. In order to claim a deduction, taxpayers need to provide their super fund with a ‘notice of intent to claim’ on or before the day the 2019 tax return is lodged or 30 June 2020, whichever is earlier. Trap: taxpayers should observe the concessional contributions cap (currently $25,000) and limit their deductible contributions to the cap amount if they want to avoid paying excess concessional contributions tax.
Second, make a payment of interest in advance on your investment portfolio. You need to ensure you don’t breach pre-payment rules, so payment of interest before 30 June 2019 would need to be for interest relating to the period prior to 30 June 2020.
Third, if you have a rental property, claim appropriate capital works and capital allowances (depreciation) deductions. Be aware that the rules changed from 1 July 2017. Capital allowance deductions can generally no longer be claimed for previously used plant and equipment (second hand assets) acquired after 9 May 2017, or second hand assets acquired before 1 July 2017 but not used to earn income in the year ended 30 June 2017. Investors who purchase new plant and equipment will continue to be able to claim depreciation expenses on these assets. Tip: engage a quantity surveyor to make an assessment and prepare a depreciation report to outline amounts to be claimed in your tax return each year. The cost of having a depreciation report prepared is also deductible.
Fourth, review un-reimbursed work-related expenses to determine the extent to which they are deductible and ensure you have retained sufficient substantiation. For example, if an employee uses their vehicle for work-related purposes then, at a minimum, they should record the kilometres travelled for work-related purposes. Trap: it is important to note that home to work travel is considered to be private travel and not work-related travel.
Fifth, ensure you have picked up all donations made during the year to deductible gift recipients. Taxpayers may make donations over the course of the year but often forget to claim them because they forget to keep a record. With increased use of electronic receipting via email, the ability to locate the receipts in the digital world has become easier.
Sixth, ensure you have adequate private hospital insurance coverage with an Australian registered health fund so that you are not liable for the Medicare Levy Surcharge (MLS). Having ‘extras’ or ‘ancillary’ cover only will not be sufficient. At present, the MLS will apply where a taxpayer’s ‘income for surcharge purposes’ is above $90,000 (singles) or $180,000 (families). Tip: it is now optional for your health insurer to send to you a private health insurance statement, so you may need to request a statement from your health insurer to complete your tax return if one is not automatically provided.
So, start collating all your information. Back up that digital file if you keep everything on your computer or bring out the shoe box. It’s never too early to be prepared.
Mardi Heinrich is a Partner, Deals, Tax & Legal, at KPMG. This article is general information and does not consider the circumstances of any person.