The normal (early) due date is 31 October 2012. This applies to anybody who lodges their own tax return.

If you lodge through a registered tax agent, you get an extension to the due date. The extension is usually until 15 May 2013, but an earlier date of 31 March 2013 applies to a small number high income taxpayers.

How to get the tax return extension for tax agents

It is very important to realise that you need to appoint a tax agent before 31 October 2012, even if you don’t lodge before then. This will mean you are listed on the ATO lodgment list for the tax agent, which allows you to get the extension.

How to get an extension for my tax return

If you are not using a tax agent, you can still apply to the ATO for an extension of time to lodge. You will need to have special circumstances such as unforeseen medical or family difficulties that will prevent you from lodging your return on time.

Overseas travel is unlikely to be an acceptable reason, as you are expected to plan around this. If you are overseas and need help with your tax return, we offer online consultations anywhere in the world via Skype and would be happy to help.

Tax return due date if you have unlodged tax returns

The extension will not apply if you have prior year unlodged tax returns. If this is your situation, the earlier due date of 31 October still applies

Where any of these dates falls on a weekend, the due date becomes the following Monday.

If you have multiple lodgments to do, you are allowed to do them out of order. So even if you can’t catch up your entire backlog before 31 October, you should still do your best to get the 2012 lodged on time.

We specialise in helping people catch on past tax returns with as little stress and headache as possible. To find out more about the easiest ways to catch up on past tax returns, see our related articles.

To get assistance with any tax returns or related issues please call our office on 1300 823 011, or email info@beyondaccountancy.com.au.

Plus, the September BAS is the only BAS that gives you the chance to switch to the easiest possible GST method that can cut your paperwork by half.

Extension for lodgment of BAS September 2012

The due date printed on your BAS will be 28 October 2012, however this only applies if you lodge your BAS on paper.

If you lodge electronically you get an extra two weeks extension. If your registered tax agent (accountant) or registered BAS agent (bookkeeper) lodges for your electronically, you get a further 2 weeks.

So the due dates are:

• Lodge yourself – on paper: 28 October 2012
• Lodge yourself – electronically: 11 November 2012
• Lodge thought a registered agent: 25 November 2012

Note: if you have an unregistered bookkeeper then they cannot access the extension.

The dates can be found on the ATO website.

Get a BAS extension by lodging electronically

To lodge electronically, you need to access the ATO Business Portal. The Business Portal is a free service and is highly useful as it allows you to complete tasks more easily and efficiently compared to using paper lodgment.

You can lodge activity statements, view past activity statements and correct any mistakes. Your ATO history and any current debt are also displayed online to help you manage any ATO payment plans you might have.

How to get an Auskey

Before you can access the ATO portal you will need to obtain an “Auskey”. An Auskey is your digital proof of ID. It is issued by the government and can be accessed for free at: http://www.auskey.abr.gov.au/.

How to lodge one BAS per year, instead of four

Did you know that you can meet your quarterly BAS obligations in 10 minutes, without the help of an accountant/bookkeeper and with two extra weeks to pay?

It’s no secret, it’s right there on your BAS. The ATO give a number of options to report your GST. One of these, called “GST option 3″, lets you pay a GST instalment (downpayment) every quarter without having to report any actual business information. You report actual sales and purchases once per year, just like you lodge your tax return once per year.

In the meantime, just pay the GST instalment amount the ATO suggests (with the two week extension if you use your Auskey) and the job is done.

It surprises us how few small businesses use this method. People tell me “I could never do my books once per year”. But you do your tax once per year, don’t you?

And we’re not recommending you never do your books – you should do them regularly, but not for the sake of reporting to the ATO. You should have good business records to make good business decisions.

Get help to make your BAS obligations simpler

If you are struggling with the paperwork for your BAS, and need help, give us a call. Also, if your current accountant and bookkeeper are not giving you the tips and ideas to help reduce your paperwork, and you think its time for a change, we are here to help.

Enquiries can be made by calling the office on 1300 823 011, or email: info@beyondaccountancy.com.au.

It wouldn’t take Sherlock Holmes to conclude that people are worried about the global economy, and its effect on their super.

Between 2001 and 2007 the Australian Stock Exchange was booming, and super was growing with it. The so called “balanced” investment options became decidedly unbalanced, with allocations to shares pushing 80%.

It seemed any fund manager with a pulse could generate large returns on investment. But we all know what happened next. The GFC hit, and the share components of super funds and managed funds plumetted.

I met a retiree who invested $1.4 million in super in 2007. Their expensively-dressed, big-bank-paid adviser said that they would have $2 or $3 million in five to ten years’ time. Needless to say it hasn’t even recovered to its starting point.

Some people are choosing to “ride it out”. You’d be surprised the number of people who are waiting for their super to “make back what it lost”, and then they plan to invest elsewhere. Others feel locked in to their current financial planner because they cannot cash in so-called “frozen funds” which got stuck with bad property and mortgage assets in the GFC.

Others are looking to different options, and if you’re read this far, you’re probably thinking about doing the same.

How do I buy gold with my superannuation?

There are several ways to buy gold, silver or other commodities through your super fund. These include:

1. Direct investment in physical gold (or silver)
2. Buying mining shares
3. Gold and silver ETFs *
4. Managed funds

* ETF means “exchange traded fund”. An ETF can be bought and sold on the stock exchange. The ETF manager buys the index or commodity in question. So a gold bullion ETF will use its funds to buy gold bullion. The investor buys in by purchasing shares in the ETF on the stock exchange. The process is the same as buying any other listed share.

How NOT to but gold with your super

But before we go on, let me tell you how NOT to buy gold in your super.

Unless you meet a condition of release, such as reaching retirement age (currently 65), or permanent retirement after reaching “preservation age” currently 55-60, you are not allowed to access to your super.

You can move your super between funds. A transfer between super funds is called a “rollover” and most people are able to roll over their money to a fund of their choice.

But to cash in your super without meeting a condition of release is illegal, as is promoting a scheme to give early access to super. Even if you withdraw it to invest the money elsewhere, it’s still illegal.

How to buy gold with your super

Step one: Ask your current fund if they have an investment option that includes gold.

Some ordinary superannuation funds allow members the option of direct investment. Your fund could be one of them. Call your super fund or your financial adviser to see if gold investment is an option.

Many super fund accounts now offer more flexible, member directed investments. Direct investment is not possible, but you can invest in gold mining shares, ETFs or managed funds, particularly if you have a “wrap account” type arrangement.

Step two: move your super to an account that allows investment in super

If you cannot buy gold in your current super fund, you’ll need to switch to one that does. Which fund should you choose? Well it depends on the type of investment you want.

Indirect investments

If you are happy with ETFs, managed funds and mining stocks there are several flexible super fund options that allow you to direct your investments. These usually incur higher fees than a standard fund and you will pay brokerage when buying shares or ETFs.

Direct investment

If you want to buy physical gold or silver with your superanuation, you will need to open a Self Managed Super Fund (SMSF). More and more Australians are choosing to use a SMSF to take control of their super. Self managed funds hold more assets than any other type of super account (industry funds, retail funds, corporate funds).

A self managed super fund is just like any other fund, except that the members of the fund are also the controllers (trustees) of the fund.

There are special rules to prevent fraud and mismanagement, and the extra paperwork is not for everybody. Plus, the government recommends that the members of the fund (maximum 4 people) should have combined super of $200,000. But for those willing to take on the responsibilities, a SMSF is the best vehicle for taking control of your super and retirement.

Buying gold through a SMSF

There are several steps to buying gold through a SMSF.

1. Establish the super fund, including a trust deed
2. Transfer (roll over) your money into your new super fund
3. Establish a written investment strategy (a legal requirement)
4. Select and purchase investments
5. Arrange appropriate storage and insurance

There are many technical aspects to investing via a self managed super fund. Beyond Accountancy can advise on the establishment of a super fund, rolling over your existing super, investing in accordance with the superannuation rules and implementing contribution and tax stategies.

We can ensure you pay the right amount of tax now and in retirement, as well as avoiding the hidden death duties that could take thousands out of the super you leave to the next generation.

Our tax and audit services are provided based on an ongoing, fixed monthly fee amount. We charge for the work we do for you, not a percentage of your assets.

To speak to an experienced SMSF accountant or to arrange a consultation call or email our office.

What is depreciation?

It is simply a recognition of the decline in value of an asset over time. In the real world things get older, they becomes worn out, and their value decreases. Depreciation is how that process is recorded in financial accounts.

The ATO allows you to claim for the depreciation (which they call decline in value) of the assets used in earning income. This includes the assets in your investment property.

When you purchase real estate you are actually buying three things:

1. Land
2. Buildings
3. Assets in the buildings

Depreciation can be claimed on the assets of your property over the course of their “effective life”, as set by the ATO. For example, the ATO suggests a ceiling fan has a life of 5 years, and carpet 10 years. Even the buildings themselves can be deducted over time. Buildings and fixtures attached to the building can be deducted at the rate of 2.5% per year.

The advantage of depreciation

Depreciation deductions are great because they allow a deduction without an expense. Specifically:

• You can claim deductions for assets and buildings even if you didn’t pay for them. When a property is sold the new owner inherits the unclaimed depreciation of the old owner.
• Depreciation is cash flow positive. Normally, to claim a deduction you first have to incur an expense. With depreciation, you get the tax deduction without having to incur any cash outflow. Unlike other expenses, depreciation puts money back in your pocket.

How to claim depreciation

Tax depreciation reports

A quantity surveyor can produce a depreciation report for a property. The report details all your assets, fixtures and buildings, and determines the deduction you can claim each year over a period of 40 years. A depreciation report could save you thousands in tax, especially if you have purchase a newly built property.

The cost of a good quality depreciation report is around $700, and is tax deductible for rental property owners. Not every property has enough depreciation deductions to justify the cost of the report. If you are unsure, simply call the quantity surveyor and ask them if the report will benefit you. Generally a report is worthwhile if your property was built within the last 10-15 years, or has had recent significant renovations (whether by you or the previous owner). Your depreciation deductions can save you thousands in tax.

You may want to know who we think are the best depreciation report providers? The best one I’ve dealt with are BMT Quantity Surveyors. They are professional and their reports are thorough and easy to read. They will tell you whether a report is needed or not for your investment property. And they send a copy of the report to your accountant via email to keep everybody in the loop. (Note: they don’t give a referral kickback to accountants, and have not paid for this endorsement!)

Calculate your own depreciation

Depreciation can be claimed without a professional depreciation report. If you were an owner-builder or the building was renovated while you owner the property then you probably have details of all the costs and outgoings. This will enable you to work out your own depreciation.

All you need is the date you bought the asset, the amount paid, and the effective life of the asset. The ATO has a comprehensive list of rental property assets with the corresponding effective life. They publish these in their annual guide for rental property owners. At the time of writing the latest version was 2010-11.

You should note that you distinguish between capital allowances (e.g. free-standing assets) and capital works (like buildings and assets that form part of the building, e.g. tiles). These are included in two separate parts of the tax return.

Claiming depreciation for previous years tax returns

Amendments can be made to a prior year tax return to include any change or adjustment. Depreciation is no exception. You can amend your tax return up to two years after your return was assessed. The exact deadline for amendments depends on when you lodged the original return. The amendment period is four years for some taxpayers. Your depreciation report will be backdated to include years you’ve previously missed.

Need help with rental property tax issues?

Making the right tax decisions will enhance the overall return you get from your property. Beyond Accountancy have staff who are experienced in helping property investors optimise their tax position. By helping you understand how you can make the most of the advantages in the tax system we help you minimise tax, maximise your investment yield and optimise your cashflow.

Our services include:

• Tax returns for individuals
• Property investment through super
• Tax projections for your next property purchase
• General advice and education
• Advice on capital gains tax and CGT property exemptions

You can book an appointment now using out online booking system. Alternatively call reception on 1300 823 011 or email us.

Here are some simple strategies to gain a financial advantage before June 30. I’ve summarised these in a YouTube video.

1. Make a personal super contribution
2. Open a first home saver account
3. Work out the tax implications of health insurance
4. Pre-pay your tax deductible expenses
5. Adjust your salary sacrifice for the new year
6. Top up your spouse’s super

1. Super co-contributions

If you are a low or middle income earner the government may match your super contributions.

If your income is less than $32,000 the government will match up to $1,000 of your personal super contributions. If you earn between $32 and $62,000 you can get a partial co-contribution.

You only qualify if 10% of your money is business or employment income. So if you’re a stay-at-home parent or self funded retiree you won’t qualify. And be careful if you are salary sacrificing or receiving fringe benefits, as this limits your entitlement.

All you need to do is put the money into super before June 30. When you lodge your next tax return you will automatically get the co-contribution.

Contact your super fund for the B Pay details to allow a contribution to be made. You’ll need to allow 3 or more days for the payment to clear.

The co-contribution changes from July 2012, so that less people qualify and you only get 50 cents in the dollar. So 2012 is the last chance for many people.

For more information go to: http://www.ato.gov.au/content/42616.htm

2. Start saving for a first home

If you are saving for a first home you should consider opening a first home saver account before June 30.

The first $5,500 of deposits into a first home saver account attract a 17% bonus from the government. It’s a great way of stretching your home deposit a bit further. The interest on the account is taxed at 15% which is less than half what most workers pay on normal bank interest.

The catch is that you have to use it for a first home, and you must contribute at least $1,000 to the account in 4 different financial years. This means now is the perfect time to make your opening contribution.
If you contribute $1,000 before 30 June you can withdraw the funds as early as July 2014. If you wait until after 30 June you can’t get the money until 2015.

It’s a great option if you’re currently renting and have a medium term timeline to buy your first home.

For more information visit: http://www.ato.gov.au/individuals/pathway.aspx?pc=001/002/066

3. Health insurance

The health insurance ads are all over the media. The all pressure you to join before 30 June. But I think they are misleading.

Firstly, most people don’t pay the 1% medicare levy surcharge with or without health insurance. Singles need to earn $84,000 and couples $164,000 before the penalty kicks in. Plus, even if you’re liable for the tax, if you joint on June 28 will only avoid the tax for three days, but you’ll be penalised for the rest of the year. I have a separate video which covers this in more detail.

There is another issue that is not tax related, and that’s the lifetime loading. If you join insurance after turning 31 you have to pay 2% extra on your premiums for each year you wait. So you should think about the loading, as well as tax.

Finally, the 30% rebate for private health insurance is being cut out for higher income earners. So if you are in one of those brackets you should consider pre-paying your insurance before 30 June to get the rebate now.

4. Pre-pay expenses

If you have tax deductible expenses you should think about paying them before June 30. For example, accounting fees, income protection insurance and work-related expenses like membership renewals, and interest on investment loans.

If you want to pre-pay my fee for next year to get the deduction early then contact me and I’ll send you an invoice.

Pre-paying gives you a timing advantage by being able to claim the deduction sooner. It is effective if your tax bracket will be the same or lower next year. If you’ll be in a higher tax bracket next year, then you should NOT prepay expenses.

2012 tax rate higher than 2013: Better off pre-paying

2012 tax rate same as 2013:Timing advantage from pre-paying

2012 tax rate less than 2013: Better off NOT pre-paying

Common reasons for your income being lower next year are study leave, maternity leave and retirement. Also, if you have a big one off income such as a capital gain this year then you should consider pre-paying as many other expenses as possible before June 30.

5. Check your salary sacrifice limit

The limit on pre-tax, or concessional, super contributions will be $25,000 from 2013. This applies for over 50s and under 50s. Because most people’s super is paid in the month AFTER they earn it they the time to adjust your salary sacrifice amount is in June, not July. You should check with your employer whether your June super will be paid in June, or July. This makes a difference to your 2013 calculations.

It’s complicated, so I’ll give you a simple formula which you can use:

$25,000 MINUS Employer amount EQUALS Remaining limit.

Remaining limit DIVIDED BY Pay periods each year EQUALS Salary Sacrifice per pay

Example: employee has an income of $100,000 plus 9% super. Total limit $25,000 MINUS $9,000 employer contr. EQUALS $16,000 remaining cap.

$16,000 DIVIDED BY 26 pays / year = $600 / fortnight salary sacrifice. If the employee’s super is paid monthly in arrears they should start the $600 per fortnight from 1 JUNE not 1 July.

If need help working out the maximum salary sacrifice amount please let me know.

6. Other super contributions

And finally if your spouse earns $11,000 or less then you can make a contribution to super for them and get a tax rebate. It’s called a spouse contribution. Any amount you put in before June 30 attracts an 18% rebate. The maximum amount eligible for the rebate is $3,000 and the maximum rebate is $540.

If you are not sure about any of these tips feel free to contact me. For more helpful tips and videos you can subscribe for free to my newsletter.

ATO pre-filling

The simplest and fastest way to find your missing tax information is to obtain your ATO Pre-filling Report.

The ATO collects information about your income from banks, employers, government agencies and other parties. This information is matched to your tax file number and summarised in your pre-filling report.

This can include:

• PAYG Payment Summaries from employers (aka group certificates)
• Centrelink payment summaries
• Details of private health insurance cover
• Bank interest
• Dividend and other investment income
• Your HELP (HECS) balance for the applicable year

You can get a copy of your most recent pre-filling information when you download e-tax and complete the proof of ID requirements. A registered tax agent can get pre-filling reports their clients as far back as the 2007 income year.

Many people can lodge a return with just the information on their pre-filling report.

How to get a copy of your group certificate

1. Remember that there is no such thing as a group certificate. Since 2001 they have been called PAYG Payment Summaries. This will save a lot of confusion in dealing with the ATO.
2. Check your pre-filling report. This is the easiest way to get a copy.
3. Have a good look for it at home. Don’t be lazy!
4. Ask your employer. Your employer has obligations to keep tax records, and most will be able to get you a copy within a few days.
5. Contact the ATO using the form Copies of returns request – individuals and authorised representatives. Fill out your personal details on page 1 and put the relevant years you are missing payment summaries for in section B. This will take 28 days to be sent to you.
6. If your request to the ATO does not provide you with the information you need you will have to complete a statutory declaration. To complete the form you will need old payslips and bank records to estimate your income.

How to find missing tax records

For PAYG Payment Summaries (aka group certificates) see above. For most other items, ask your accountant for a copy of your pre-filling report. If you still can’t get the information, here are some helpful ways of finding it.

• Bank interest: For recent years you can probably get a summary of interest on internet banking. For older years, call your bank.
• Dividends: If you own shares you will probably have received dividends. Your dividend history will be shown on each company’s share registry. The name of the registry will be printed on your dividend statements, and you can log in online. Most companies use Computershare or Link Market Services as their share registry. You can get several years’ worth of tax history online within 5 minutes.
• Private health insurance: Your private health provider can tell you (a) what period you were covered by health insurance and (b) whether have you already claimed your 30% rebate, or whether you still need to do that on your tax.

With a few phone calls you can get most of your lost records.

Can somebody find my tax records for me?

Glad you asked. The easiest way to get a copy of all your tax records is to get help from a registered tax agent like Beyond Accountancy.

We have access to your pre-filling report records from the ATO tax agent portal, so we know more about your tax history than you do. A pre-filling report can be generated in about 5 minutes and can save a lot of your time in chasing banks, old bosses etc.

Not only that, we can show you the best ways to find your records from other sources, and explain the process where records cannot be found at all.

And once the records are found we have the skill and advice to prepare a tax return for you to get you the best tax result with a 14 day tax refund. We can also set you up so that you are in a better tax position for the future.

Flexible appointment times are available at our office in Bourke St, Melbourne, or we offer online appointments anywhere in Australia or overseas. With an online appointment you don’t need to go further than your home office to get your tax affairs sorted.

To speak to an accountant call 1300 823 011, or click on the contacts link above. You can even book an appointment now using our online calendar.

Even if you don’t want to be a client right now, you can subscribe for free to our tax newsletter.

You might have been too busy, the tax return form might have looked too complicated or there may have been legitimate reasons (like health or relationship issues) that stopped you from lodging.

Don’t worry, it’s very common, and (with the right help) the problem is easily fixed. Whatever the reason you fell behind, you need to get up to date. And once you do, you’ll get a better night’s sleep, and maybe even a tax refund, too.

How to lodge late tax returns

This post will explain to you some simple steps to take to catch up on outstanding tax returns or late tax returns. In fact, with the right help, you could be up to date with all your refunds with a month.

These tips and shortcuts come from our experience in helping people lodge multiple tax returns.

Step one: find out how many years of tax returns are overdue

Getting help: contact your accountant / registered tax agent and ask them to check your lodgment status. Registered tax agents have more access to your tax records that you do, via the tax agent portal. In fact, we can find out in 2 minutes how many outstanding returns you have from from 2001 until now.

Do-it-yourself: Call the ATO on 13 28 61 and ask them for which years you have tax returns outstanding. You’ll need your tax file number ready when you call. You may also need a previous ATO generated notice, (e.g. a Notice of Assessment or an ATO letter with a reference number) or personal details which match ATO records, such as a bank account number.

Step two: do you need to lodge a tax return?

You need to lodge something with the ATO every year, but it doesn’t necessarily have to be a tax return. If you meet certain conditions, you may be able to submit a non-lodgment advice with the ATO. For example, you may have income below the tax free threshold.

Getting help: your tax agent can work out which years you can submit a non lodgment advice.

Do-it-yourself: See the ATO website for more details.

Before submitting a non-lodgment advice you should consider if you need to lodge to get a superannuation co-contribution or family payment, such as education tax refund.

Step three: get your paperwork ready

This is the most daunting step for most people.

Getting help: contact your registered tax agent and ask for a copy of your pre-filling report.

The simplest and fastest way to find your missing tax information is to obtain your ATO Pre-filling Report.

The ATO collects information about your income from banks, employers, government agencies and other parties. This information is matched to your tax file number and summarised in your pre-filling report.

This can include:

• PAYG Payment Summaries from employers (aka group certificates)
• Centrelink payment summaries
• Details of private health insurance cover
• Bank interest
• Dividend and other investment income
• Your HELP (HECS) balance for the applicable year

A registered tax agent can get pre-filling reports for their clients from as far back as the 2007 income year.

Many people can lodge a return with just the information on their pre-filling report.

However, the pre-filling report only goes back to the 2007 income year, and many details are only available from 2008 onwards.

You will also need to find your receipts and deductions for the relevant year. If you haven’t lodged in years, receipts might be had to find.

But don’t worry, there are some deductions you can claim without having receipts. A tax agent can help your work out what you can claim based on your job and investment situation.

Do-it-yourself: You will need to find all your paperwork yourself. Even if you have lost paperwork, there are simple ways you can replace it. See our article on finding lost tax records.

Step four: complete the tax return forms

Getting help: Your registered tax agent can lodge tax returns for you electronically. Beyond Accountancy can prepare and lodge returns on the spot if you have all the information ready. Refunds can be paid as early as 1-2 weeks, and the appointment can be done in person or online.

Do-it-yourself: The easiest way to lodge your own tax is using the ATO e-tax software. The only issue you will face is that e-tax has an expiry date. For example, e-tax 2011 had already closed at the time of writing.

This means you have to lodge using another method, such as using the ATO self-help phone lodgment service, or tracking down the paper tax form. Paper tax forms take 8 weeks to be processed, and are a pain to lodge. For this reason, I’d recommend using a tax agent. If you can’t afford a tax agent, the ATO offers free tax help for low income earners.

Step five: Family Assistance claims

Once you are up to date with your tax returns you will be able to claim Family Assistance entitlements for previous years. Family tax benefit claims can be made up to two years after the end of the financial year. If you’re not keen to fill out the 70 page claim form, Beyond Accountancy can assist you to make an online claim for family tax benefit.

How to get help with your tax

Call Beyond Accountancy on 1300 823 011 to speak to an accountant, or book an appointment now via the website.

The advantages of using a tax agent are:

1. we have access to your lodgment history and tax records
2. the process will be much quicker, and refunds will be paid sooner
3. you have the peace of mind of knowing that your returns will be lodged accurately.
4. we have the knowledge and skill to get your the best tax result, and
5. we can help you improve your financial situation going forward.

We have helped clients who have had up to 19 years of tax returns to lodge, and successfully negotiated up to $50,000 in debt reductions from the ATO.

And we’re not here to judge anyone, we’re here to help you. After all, there are a lot worse things you could do than forget to lodge one or two (or ten) tax returns. It’s not a guilty secret. It’s just a bit of paperwork

Contact us now to take the first step towards the relief of having your tax affairs up to date. Don’t wait until your paperwork is 100% complete… it might never be. Get in touch now on 1300 823 011 and we’ll take the pressure off you.

The ATO has sent a warning to tax agents about clients with overdue tax returns: hurry up and lodge, or we’ll lodge for you!

They are threatening to use a tactic you might have seen if you watched series one of Underbelly. (More on that below).

The ATO has a little known power under the tax law that allows them to make their own estimate of your taxable income based on the information they have about the taxpayer. So you can get a tax bill without even lodging a tax return.

Who does this affect?

The recent warning shows the tax office’s intention to use this power to send tax bills to people who have a track record of failing to lodge their tax returns.

If it’s been a while since you lodged a tax return then you could be on the hit list.

In my experience, you are a more likely target if:

• You owed tax last time you lodged a return
• You have an existing tax debt
• You have unlodged BAS statements, as well as returns

How does the ATO know my income?

The ATO knows how much employment income you earn and the ATO knows how much interest income you earn because of data matching.

Employers, banks and other investment providers (such as companies you might hold shares in), have to report information to the ATO. Most investors give their tax file number to their bank or the companies they hold shares in. If you don’t provide your TFN you get taxed at 46.5% anyway, so you can’t win either way.

To put it simply, the probably ATO already know how much your employer paid you, how much PAYG tax you paid, your interest income, your share dividends, whether you had a HELP debt and your private health insurance cover.

According to the ATO, other ways the ATO might calculate your income are:

• information provided by third parties
• the income recorded on your BAS statements
• internal and external data matching
• measuring increases in your assets over the relevant period
• looking at unexplained deposits in your bank account (yes, they can look at your bank accounts)
• comparing your declared income to your level of lifestyle

The Underbelly example

If you’ve seen the first series of Underbelly you might remember a scene where ATO reps walk into the cafe of one of the “gangland figures”. The ATO staff member hands over a tax bill for millions of dollars, based on their estimate of the taxpayers income for the past decade.

Imagine you were the ATO stooge fronting up to one of the Melbourne crime world’s toughest characters! The result is that the guy is eventually put in jail over the unpaid tax debt.

Although Underbelly is a semi-fictitious TV show, it’s an illustration of the kind of power the ATO have. Let me repeat my earlier point: you don’t need to lodge a tax return to get a tax bill.

Case studies

But we are here to help you.

Case study #1: negotiating a large tax debt

Here are some real-life case studies about people we have helped catch up on old returns. Obviously there are no real names used.

Harry has not lodged his BAS or tax return for four years, and owed a six figure amount to the ATO. The ATO were days away from referring him to a debt collector, and were theatening to take legal action.

When we talked to Harry about his situation we discoverd that more than half of his debt was due to ATO penalties. Also, he didn’t even need to be lodging BAS statements or paying GST anymore because his employment situation had changed.

One month after contacting us, we had:

• Cancelled Harry’s PAYG, GST and ABN registration
• Lodged 13 BAS statements
• Lodged 4 tax returns
• Sucessfully requested a $50,000 remission of ATO penalties
• Negotiated a payment plan for the remaining debt that suited both Harry and the ATO

And all this was done via online consultations as Harry lived in a different state to Beyond Accountancy. Harry was relieved to have the burden of the debt and ATO letters lifted from his shoulders. We even arranged a payment plan for our fee so he could pay us off while still meeting his ATO repayments.

Case study #2: standard employee

Charlie worked as an employee and always got tax refunds, but had not lodged a tax return for years. He was missing a few group certificates (PAYG Payment Summaries) which he thought might stop him from lodging returns.

We assisted Charlie in finding his missing documents through ATO records and lodged his outstanding returns, resulting in refunds of over $2,000.

In reviewing his affairs we also found unclaimed Centrelink entitlements he didn’t know he had. Not only was Charlie relieved to have the old returns up to date, but he finished up with quite a bit of money out of the process.

Take action today!

If you have read this far you can probably relate to the stress of having outstanding business with the ATO. Experience suggests that it’s probably not as hard to sort it out as you think.

And, who knows? You might end up with money in your pocket. Most employees get tax refunds, not tax bills.

You can contact us now on the number at the top of the screen. Alternatively, if you are ready to book an appointment you can start the process immediately by clicking on the button above.

Don’t let your location be an excuse. With our online consultations we can and do help clients all over Australia.

You will be surprised how easy it is to sort out your tax with the right professional advice. And you won’t regret putting the stress behind you.

To get your copy of the budget update please subscribe to our newsletter using the form on this website.

Headlines:

• Super contributions limit cut for people over 50
• Education tax refund payment to be replaced with "Schoolkids Bonus"
• Bad news for business with corporate tax rate cancelled
• Personal tax initiatives scrapped
• Changes to family tax benefit
• Co-contribution to be cut in half

What do I do about it?

The newsletter will give you the facts.  But what does it mean for you?  Here are some tips for various groups.

Businesses buying new assets: Currently you can write off assets up to $1,000.  From next July that increases to $6,500.  Also, cars purchased from July onwards get an immediate $5,000 write off (new or second hand).  So you might want to delay non-urgent purchases until July for tax reasons.

Over 50s salary sacrificing: If you are over 50 this is the last year you will have a $50,000 concessional contributions cap until the 2014-15 financial year.  This means that it is now your last chance  for 3 years to put large amounts of pre-tax salary into super. From 1 July 2012 the limite will be $25,000 for everybody, regardless of age.

Last change for a co-contribution: The co-contribution is set to drop froma $1 to $1 ratio down to a $0.50:$1 ratio.  After 30 June 2012 the maximum contribution will be $500, not $1,000.  If your adjusted income is under $31,980 the government will match the $1,000 of personal super contributions you make before the end of financial year.  Incomes between $31,980 and $61,980 will get a proportionate contribuion.

High income earners: Nothing gets votes like taxing "the rich" and giving bigger payments to "battlers".  If you're a high income earner get set for more expensive health insurance and higher penalties for opting out of health insurance.  Plus, your super contributions tax will double from 15% to 30% if your income is over $300,000.  The main action to take is to look at getting health insurance as soon as possible if you don't have it already.  Or maybe move to New Zealand where the tax rates are much lower.

SMSF trustees: time to audit your auditor! The ATO is continuing to get tough on Self Managed Super Fund (SMSF) auditors to ensure auditors are competent and independent.  This may put pressure on accountants who audit their own super funds. Beyond Accountancy does not audit its own funds and uses experienced, highly skilled auditors to ensure a high level of quality is maintained.

Simpler replacement for education tax refund: The school kids bonus will provide a similar payment to the current education tax refund.  So what do you need to do to claim it?  The answer is nothing!*  It is an automatic payment, meaning less paperwork and less hassle.  Don't forget that if you forgot to claim education tax refund or family tax benefit in a previous year you can still go back and make a retrospective claim.  Both can now be claimed online, and we can help you lodge the necessary forms.

* note: if Centrelink don't know your child has started Prep they may need to be told this in order for you to get the automatic payments which start this June.

Ask a question: Clients and subscribers: if you have a specific question about the budget changes and how they effect you, contact us at info@beyondaccountancy.com.au

More strategies

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Tip: if you want skip the background information and go straight to the new rules, scroll down to the fourth heading.

What is Living Away From Home Allowance?

The Living Away From Home Allowance (LAFHA) is a payment made to an employee who is living away from their usual residence due to work commitments. The advantage of the allowance is that, unlike other allowances, it is effectively tax free.

How does it work?

LAFHA does not count as a assessable income, which means you don’t include it in your personal tax return. This effectively reduces the your personal tax. It is classified as a fringe benefit, and fringe benefits tax is paid by employers, not employees.

Furthermore, unlike other fringe benefits, LAFHA is exempt from FBT. This means the employer does not pay tax either. Employers use LAFHA as an enticement to attract overseas workers who will work on a 457 temporary residents visa.

Here is an example of why there is an advantage:

Note that the employer still only pays $95,000 in total under both scenarios.

Why the ATO is unhappy with the current use of LAFHA

The Living Away From Home Allowance was designed to assist employees who have a permanent home which they are living away from for work purposes. The rules mean that an employer can pay the costs of living away from home without causing the employee to incur extra tax.

LAFHA was never intended to be a tax bonus for temporary residents. It was also probably intended to cover situations where the employer paid an allowance on top of the existing salary package to cover costs. In reality, temporary residents use LAFHA to transform taxable income into tax free income, with no incremental cost to the employer.

The rules have also tried to distinguish between an employee who is living away from their usual home, and an employee who has simply re-located internationally. It is not unheard of for a temporary resident to put off applying for permanent residency for the sake of the tax advantages of temporary residency*, which include LAFHA.

* For a fact sheet on the tax advantages for temporary residents email us on info@beyondaccountancy.com.au

The government is now acting to restrict the use of LAFHA to a more narrow set of circumstances, which will adversely affect many temporary residents current receiving the allowance.

New rules for Living Away From Home Allowance (LAFHA)

The following is from the government’s Constulation Paper:

Essentially, the home you are living away from must be one you maintain in Australia. You could not have a family home in London, for example, and claim a LAFHA for a property you rent in Melbourne. In that case, you will only be eligible for tax concessions if you live away from your Melbourne home.

The new rules close the current loophole that allows ex-pat workers to be paid a tax free allowance for the sole place of residence in Australia. Read the following example:

So while temporary residents can still receive LAFHA, but unless they are working away from their Australian home, the allowance is taxed in exactly the same way as the rest of their wage, so the tax benefit is no longer there.

What can I do about this?

The proposals are not law yet, but it appears likely that they will be passed through parliament. You cannot do much about it from a tax point of view. The main point of action should be to re-negotiate your salary package from 1 July 2012 when the new rules are scheduled to come into effect.

If you are no longer entitled to LAFHA, your gross salary package will not change, but from 1 July 2012 your tax home (after tax) pay will drop. And it is your tax home pay that really matters in evaluating what your current salary is worth to you.

Once the changes become law, you need to start talking to your employer about whether they can increase your gross salary to offset part or all of the drop in your take home pay. Ideally, you should aim to have the same take home pay before and after any changes. Whether such a large increase in gross pay is commercially viable is a matter for you and your employer.

Need to know more?

Contact us on info@beyondaccountancy.com.au or 1300 883 122 to discuss how this could affect you, or to arrange a consultation or request a copy of our flyer on tax issues for temporary residents.

Existing clients can contact their usual accountant via direct phone or email contacts.

To keep up to date with other relevant tax tips and changes sign up now on the right hand side of this page.

Disclaimer: this information is current to the best of our knowledge at the date of publishing. This is general information for the purposes of education clients and potential clients of Beyond Accountancy. Legislation can change at any time and this may invalidate the information in this article. Personal tax advice will require an official client engagement with Beyond Accountancy.