More than two-thirds of taxpayers will head into tax time with inflated confidence, but most won’t have the resources necessary to navigate the “major” tax implications likely to accompany the ATO’s shifted compliance focus this year, says a national tax and accounting network.
H&R Block on Monday released the results of new research that shows 66 per cent of taxpayers are confident handling their affairs heading into tax time this year, despite warnings the ATO will crack down on working-from-home expenses, shares, crypto assets and property investments.
Mark Chapman, director of tax communications at H&R Block, said the overconfidence could see some taxpayers expose themselves to ATO audits off the back of a year which saw a slew of tax trends emerge.
“When facing these new milestones,” Mr Chapman said, “many don’t have the resources for making the jump nor are they equipped for the tax changes and associated costs and benefits, and could risk being audited by the ATO.”
A further 32 per cent of Australian taxpayers, conversely, said they expected increased scrutiny from the ATO this income year. Meanwhile, 25 per cent of respondents said they would turn to a professional tax agent to handle their tax return this year, rather than doing it themselves.
Mr Chapman urged more taxpayers to adopt the mindset amid warnings of various compliance crackdowns from the ATO, which have included focuses on working-from-home expenses, and a renewed approach to monitoring crypto asset reporting.
The ATO last week warned that it would write to about 100,000 taxpayers to alert them to their tax obligations amid growing concerns that taxpayers believe their cryptocurrency gains are tax-free or only taxable when their holdings are cashed into Australian dollars.
ATO analysis showed that there are more than 600,000 Australian taxpayers who have invested in crypto assets following surging interest throughout the pandemic.
“Australians who have done well on the sharemarket, with property or even with bitcoin during the past year, face being audited if they get their returns wrong,” Mr Chapman said.
“Australians can face a 25 per cent penalty for carelessly miscalculating how much they earned from shares, investment properties, and now cryptocurrency.”
The results also showed 52 per cent of those surveyed aren’t optimistic they will receive a bigger tax refund this year than they did last year. Mr Chapman said Australians can, however, expect a bump, as the pandemic has resulted in reduced tax liability and increased entitlements.
“Australians will get a bumper tax return this year due to the low and middle income tax offset and also the change in tax thresholds from 1 July 2020,” Mr Chapman said.
“For all those Aussies who expect to pay tax this year, this could come as a pleasant surprise, as the impact of both measures could mean they are actually due a refund, or at the least a decrease in their tax liability.”
While 66 per cent of taxpayers surveyed reported feeling confident handling their own tax returns, 33 per cent said the implications of COVID-19 are likely to complicate their affairs, and 19 per cent are unsure.
Mr Chapman said taxpayers should be aware that each tax return is different, and to consult a tax agent if tax time gives rise to confusion.
“Each taxpayer has different entitlements and requires personalised and professional advice. We recommend all Aussies have a conversation with their tax agent,” Mr Chapman said. “When it comes to tax time, this year, many need to realise that there is no one-size-fits-all approach.
“Every tax return is different, with varying deductions and offsets. In the last year, temporary full expensing has been introduced, tax thresholds have been changed and offsets have been extended.
“Working from home has been common, with the resulting tax dilemma — which of the three methods to use? — causing confusion.”
Get breaking news
Login
iscover
Newsletter
