We’ve assembled some important updates for March 2018, from National Tax & Accountants’ Association to help you stay in the loop of accounting and tax updates for you and your business.
ATO’s focus on work-related expenses
This year, the ATO is paying close attention to what people are claiming as ‘other’ work-related expense deductions, so it’s important when taxpayers claim these expenses that they have records to show:
n they spent the money themselves and were not reimbursed;
n the expense was directly related to earning their income; and
n they have a record to prove it.
If the expense is for work and private use, the taxpayer can only claim a deduction for the work-related portion.
Importantly, taxpayers are not automatically entitled to claim standard deductions, but need to be able to show how they worked out their claims.
Editor: ‘Other’ work related expenses are expenses incurred by employees in relation to their work that are not for travel, clothing or self-education, such as home office expenses.
Taxpayer can’t explain where she got the money to pay her expenses
The Administrative Appeals Tribunal has upheld amended assessments issued by the ATO to a beauty technician, based on the high volume of money passing through the taxpayer’s various accounts when compared with the modest income she had included in her tax returns.
For example, in the 2015 income year, the taxpayer had declared income of $61,842, but the ATO’s analysis of her bank accounts, records of international money transfers, and casino data suggested she had spent $107,328.
The Tribunal noted that, in cases like this, the ATO is effectively making an “informed guess” as to the taxpayer’s income, but, provided there is a rational basis for the estimate, the ATO’s assessment will stand, unless the taxpayer can:
q demonstrate the assessment was excessive; and
q establish what the correct (or more nearly correct) figure is.
After hearing from the taxpayer and witnesses at the hearing, and after reviewing the documents, the Tribunal was not persuaded that the taxpayer had demonstrated that the Commissioner’s assessments were ‘excessive’.
In particular, the taxpayer’s explanation regarding her income and expenditure was not supported by the objective facts in the hearing, being:
n the ‘churn’ through her bank accounts;
n the absence of contemporaneous records beyond the bank accounts (for example, she was always paid in cash without receiving pay slips); and
n the deficiency in corroborating evidence from other witnesses.
In addition to upholding the amended assessments, the Tribunal was also satisfied that the ATO’s 75% administrative penalty on top of the tax payable was properly imposed.
Uber driver not an ’employee’
In a recent case, an Uber driver’s access to the Uber app had been terminated as a result of failing to maintain an adequate overall rating, and he applied to the Fair Work Commission (FWC) for an unfair dismissal claim against Uber.
However, the FWC held that he was an independent contractor and not an ’employee’, and therefore his application for unfair dismissal was dismissed.
Editor: Although this was not a tax case, it is obviously of interest to anyone involved in the ‘gig economy’, and it may have flow-on implications for other employment issues, such as super guarantee.
New small business benchmarks are available
The ATO has updated its small business benchmarks with the latest data from the 2015/16 financial year.
In addition to helping businesses to see if they are performing within their industry average, the benchmarks are one of the tools the ATO uses to identify businesses that may be a higher risk.
Editor: That is, they use the benchmarks to pick their audit targets, so please contact us if you would like us to check whether your data is inside or outside the average benchmark range for your industry.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
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