Tax time 2020
The past months have been hectic for tax professionals as they assisted their clients to access economic stimulus measures and support, while maintaining tax advice and lodgment services. As we emerge from the COVID-19 lockdown and with the financial year-end fast approaching, CPA Australia has developed this summary of tax time information for tax professionals.
After huge efforts to implement the JobKeeper, cashflow boost and early access to superannuation measures, the ATO is now focused on Tax Time 2020. Professional associations are in close dialogue to ensure that issues arising from COVID-19 and the preceding natural disasters are addressed and that tax professionals can access the information they need to help clients get their tax affairs in order.
The following tips will help guide your conversations with clients and make tax time a little easier.
Must know right now tax tips for all tax agents
- The ATO will start processing 2019-20 tax returns from 5 July with pre-fill information expected to be fully available in mid-August. The ATO is preparing for higher-than-usual lodgments in July as taxpayers seek to access refunds as early as possible. However, with pre-fill information often incomplete, we caution tax agents to discuss with clients the potential for ATO adjustments at a later date as data-matching identifies errors.
- COVID-19 impacts and support measures may affect clients’ tax returns. Ensure that all assessable income is declared including taxable grants, additional income-earning activities, employment termination payments, and JobSeeker; as well as checking work-related expense claims and rental deductions. Some taxpayers may find that they have a liability if PAYG withholding amounts were incorrectly calculated or if they received government payments.
- Check that clients correctly received cashflow boost and JobKeeper payments and amend incorrect claims. Also, review the accounting and tax treatments of these amounts, especially for private companies and trusts. It would also be wise to ensure that documentation related to turnover tests, eligible employees, restructuring and changes to payments is of a high standard.
- Most employers are now reporting through Single Touch Payroll (STP) with finalisation declarations due by 14 July if they have 20 or more employees, or 31 July if they have 19 or fewer employees. Income statements will be available through Online services for agents or myGov. Payment summary forms can be ordered from the ATO for those not yet using STP.
- There are changes to line entry deduction data for individual tax returns with the introduction of income and multi-property rental schedules, in addition to the deduction schedule introduced in 2019. This granular data are sent to the ATO and forms part of the tax return.
- The ATO is providing a shortcut method to calculate working from home expenses at 80 cents per hour between 1 March 2020 and 30 June 2020.
- Rental activities may have been impacted by COVID-19 with deferred or reduced rental income, changes to the private use of the property and changes to interest payments on loans. Ensure that the correct tax treatment is applied, and appropriate adjustments are made to claims if required.
- Many small businesses have experienced significant impacts from COVID-19 and tax time conversations provide an opportunity to discuss business viability and potential options for clients. Consider tax issues such as bad or forgiven debts, GST adjustments, trading stock and losses, as well as advice on business recovery. Ensure that clients are up to date on their employee obligations and activity statement lodgments and encourage them to enter payment arrangements with the ATO for outstanding liabilities.
- From 1 July 2019, there are limits on deductions able to be claimed for vacant land. The limits do not apply to corporate tax entities but affect individuals, partnerships, self-managed superannuation funds and certain trusts. Expenses related to holding land remain deductible if they are incurred in carrying on a business such as farming or gaining or producing assessable income.
- From 1 July 2019, anti-avoidance rules for circular trust distributions have been extended to family trusts.
- Crypto-currency, sharing economy and crowdfunding come with tax implications. Check if your clients are involved in these activities – as investors, contractors or contributors – to ensure they correctly report income and gains, and claim deductions and losses.
- Taxable payments annual reports are due 28 August with road freight, information technology, security, investigation and surveillance services included from 1 July 2019.
- COVID-19 may have affected the tax residency status of some individuals with the ATO taking a pragmatic approach to short-term working arrangements.
- Be mindful of the Tax Practitioners Board guidance on reasonable care, online security, exercising supervision and control when working remotely, and get your clients’ permission if you are using cloud computing services.
For further details, see our tax time information for agents.
CPA Australia members also have access to 2020 year end resources for use in their client engagements.