The ATO has revealed it will request a further five years’ worth of policy information from over 30 insurance companies about taxpayers who own marine vessels, thoroughbred horses, fine art, high-value motor vehicles and aircraft.

Insurers will be asked to provide the ATO with policy information where the value of assets is equal to or exceeds the following thresholds:

Marine vessels - $100,000Motor vehicles - $65,000Thoroughbred horses - $65,000Fine art - $100,000 per itemAircraft - $150,000

The ATO expects to receive information about assets owned by around 350,000 taxpayers from 2016 to 2020 as part of its data-matching program, with the information intended to be used as part of the ATO's compliance profiling activities.

As an example, ATO Deputy Commissioner Deborah Jenkins said:

“If a taxpayer is reporting a taxable income of $70,000 to us but we know they own a three million dollar yacht then this is likely to raise some red flags.”

However, Deputy Commissioner Jenkins also clarified the data will not be used to initiate automated compliance activity:

“Taxpayers selected for compliance activities are identified through other methodologies. The data is made available to our compliance teams to support their risk profiling of the selected taxpayers. Existence of an insurance policy may or may not prompt the compliance officer to pursue a particular line of enquiry.”

Aside from helping identify taxpayers who may be understating their income, the data from insurers may be used by the ATO to identify taxpayers who have made capital gains on the disposal of certain assets but who have not declared this to the ATO. It will also be used by the ATO to identify incorrect claims for GST input tax credits where taxpayers are incorrectly claiming GST credits as if the (private) item was a business asset. SMSFs the ATO suspects may be acquiring lifestyle assets purely for the personal enjoyment of the fund's trustee or beneficiaries are also likely to be looked at by the ATO.

If you feel that you may be targeted by this latest ATO data collection activity and are concerned about the implications, please feel free to contact our team to discuss your individual circumstances.

It is always a pleasure to be able to catch up with our clients before the hustle and bustle of the holiday season. Thank you to everyone who joined us for our end of year client seminar this year, as well as to Bob Cunneen (MLC) and Troy Palmer (Mills Oakley) for coming along and sharing valuable insights in their areas of expertise!

Here are just some of photographs captured during the afternoon:

From 1 January 2020, eligible individuals with multiple employers will be able to apply to opt out of receiving super guarantee ('SG') from some of their employers, in order to help them avoid unintentionally going over the concessional contributions cap.

If appropriate for them, they will be able to submit the relevant ATO form to apply for an SG employer shortfall exemption certificate, which releases one or more of their employers from their SG obligations for up to four quarters in one financial year.

It is important to note this measure may not benefit everyone who is eligible, so before lodging the form, you should consider your employment arrangements, including how your pay and other entitlements may change (if at all) and the effect of any relevant award or workplace agreement applicable to you.

The measure only became law on 2 October 2019. To give eligible employees time to make an application, the ATO has advised it will accept applications for the 2019/20 financial year as follows:

third quarter commencing 1 January 2020 — lodge on or before 18 November 2019; andfourth quarter commencing 1 April 2020 — lodge on or before 31 January 2020.

A separate application will be required for each financial year.

Unsure whether opting out of SG is a suitable option for you? Give us a call and we will work through it with you.

Nearly 700,000 taxpayers claimed almost $2 billion of ‘other’ expenses last financial year. Here are just some examples of the very unusual expenses picked up (and disallowed) by the ATO's systemic review process:

claims for Lego sets bought as gifts for children, and sporting equipment or membership fees for their child athletes;claims for dental expenses (believing a nice smile was essential to finding a job);some taxpayers tried to claim the purchase of a brand new car (in excess of $20,000 each!), with one particularly charitable taxpayer trying to claim a car purchased as a gift for their mother;other taxpayers claimed child support payments, private school fees, school uniforms, before school care and other school expenses, as well as health insurance costs and medical expenses; andone taxpayer decided to claim the cost of their wedding reception.

All jokes aside, the ATO has taken this opportunity to remind taxpayers that, in order to claim an ‘other’ deduction, the expenses must be directly related to earning income and they need to have a receipt or record of the expense.

The ‘other’ deductions section of the tax return is for expenses incurred in earning income that don’t appear elsewhere on the return — such as income protection and sickness insurance premiums.

Not sure if an expense can legitimately be claimed as a deduction on your tax return? Give us a call and we will help you work it out.

The ATO has advised work-related car expenses will be a key focus again this tax season.

Assistant Commissioner Karen Foat said over 3.6 million people made a work-related car expense claim in the 2017/18 financial year and this amount to more than $7.2 billion:

"We are still concerned that some taxpayers aren’t getting the message that over-claiming will be detected and if it is deliberate, penalties will apply. While some people do make legitimate mistakes, we are concerned that many people are deliberately making dodgy claims in order to get a bigger refund. We see taxpayers claiming for things like private trips, trips they didn’t make, and car expenses their employer paid for or reimbursed them for.”

The ATO has indicated that one in five car claims are exactly at the maximum limit which doesn’t require receipts. Although under the cents per kilometre method taxpayers don't need to keep receipts, they do need to be able to demonstrate how they worked out the number of kilometres they travelled for work purposes.

The ATO uses sophisticated analytics to compare taxpayer claims with others earning similar amounts in similar jobs. When they identify a questionable claim, they contact the taxpayer and ask that they show how the claim was calculated. The ATO may even contact an employer to confirm whether the taxpayer was required to use their own car for work-related travel.

Wondering if you have a genuine claim for work related car expenses? The ATO has provided some case studies of unsupported claims they discovered in the last financial year:

When the ATO asked a taxpayer to provide the logbook to support a claim of $4,800, they found the taxpayer was referring to a car service logbook rather than a logbook kept for calculating their work use car percentage (the taxpayer had not undertaken any work-related car travel during the year).Another claim was flagged by the ATO's analytics indicating a taxpayer (a retail worker) had incorrectly claimed $350 for the cost of public transport to and from work.The ATO also identified an office worker claiming $3,300 for 5000 kilometres of work-related travel using the cents per kilometre method, but it turned out the taxpayer's claim was based on trips he made from home to work.

If you're uncertain about whether you are entitled to make a claim for work-related car expenses, get in touch with us and we will help you work it out.

The ATO has released details of their "Lifestyle assets 2013-14 and 2014-15 financial years data matching program protocol".

They will obtain information on insurance policies for certain classes of assets, including marine vessels, enthusiast motor vehicles, thoroughbred races horse, fine art and aircraft to improve their profiling of taxpayers and provide a more comprehensive view of their assets and accumulated wealth.

For more information on how this may affect your individual circumstances, please do not hesitate to get in touch with us.

The ATO has advised it will be targeting false clothing and laundry work-related expense claims this tax time.

In 2018, around six million people claimed work-related clothing and laundry expenses totalling nearly $1.5 billion. Assistant Commissioner Karen Foat noted that, although many Australians can claim clothing and laundry expenses, it’s unlikely that half of all taxpayers are required to wear uniforms, protective clothing or occupation-specific clothing to earn their income.

“Last year a quarter of all clothing and laundry claims were exactly at the record-keeping limit", Ms Foat said. "But don’t think that we won’t scrutinise a claim because we don’t require receipts”.

The ATO is also concerned about the number of people claiming deductions for conventional clothing, such as retail workers claiming normal clothes "because their boss told them to wear a certain colour, or items from the latest fashion clothing line", or others claiming normal clothes because they only wear them to work.

The ATO’s sophisticated data analytics is constantly improving and can identify unusual claims by comparing taxpayer claims to others in similar occupations. Taxpayers who can’t substantiate their claims should expect to have them refused, and may be penalised for failing to take reasonable care when submitting their tax return.

Wondering whether you are entitled to make a laundry claim as part of your tax return? Give us a call and we will help you work it out.

A good strategy to reduce tax payable is normally to accelerate any income tax deductions into the current income year which will reduce overall taxable income in the current year. When prepaying expenses before 1 July 2019, ensure that any service being paid for are to be provided within a 12 month period that ends before 1 July 2020. Otherwise, the deductions must generally be claimed proportionately over the period of the prepayment.

For a list of common claims made by individuals, click here to register your interest.

There are new simplified depreciation rules in force which entitle small businesses to an immediate deduction for low-cost assets in the year they are first used or installed ready for use for a taxable purpose.

Thanks to recent changes, small business entity ('SBE') taxpayers may be entitled to an immediate deduction in the 2019 income year for acquiring certain depreciating assets costing up to $30,000 (net of entitlement to GST input tax credits) for assets used or installed ready for use from 7:30 pm AEST on 2 April 2019 until 30 June 2019.

Assets acquired prior to 2 April 2019 may also be eligible for immediate write-off, however the thresholds may be lower (e.g., the threshold is $20,000 for assets used or installed ready for use from 1 July 2018 until 28 January 2019, and $25,000 for assets used or installed ready for use from 29 January 2019 until 7:30 pm on 2 April 2019).

In addition to this, for the first time, medium sized businesses (which have an aggregated turnover of less than $50 million) may also be eligible to claim an immediate deduction for acquiring assets from 2 April 2019.

If you have a small or medium sized business and are wondering if these new rules apply to you, get in touch and we will help you work it out.

Want to help boost your retirement savings while potentially saving on tax? Here are five smart super strategies to consider before the end of the financial year.

1. Add to your super – and claim a tax deduction

If you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for this financial year – and potentially pay less tax. And at the same time, you’ll be boosting your super balance.

How it works

The contribution is generally taxed at up to 15% in the fund (or up to 30% if you earn $250,000 or more). Depending on your circumstances, this is potentially a lower rate than your marginal tax rate, which could be up to 47% (including the Medicare Levy) – which could save you up to 32%.

Once you’ve made the contribution to your super, you need to send a valid ‘Notice of Intent’ to your super fund, and receive an acknowledgement from them, before you complete your tax return, start a pension, or withdraw or rollover the money.

Keep in mind that personal deductible contributions count towards the concessional contribution cap, which is $25,000 for this 2018/19 financial year (which also includes all employer contributions, including Superannuation Guarantee and salary sacrifice). Penalties may apply if you exceed the cap – so it’s important that you stay within the limits.

2. Get more from your salary or a bonus

If you’re an employee, you may be able to arrange for your employer to direct some of your pre-tax salary or a bonus into your super as a ‘salary sacrifice’ contribution.

Again, you’ll potentially pay less tax on this money than if you received it as take-home pay – generally 15% for those earning under $250,000 pa, compared with up to 47% (including Medicare Levy).

How it works

Ask your employer if they offer salary sacrifice. If they do, it can be a great way to help grow your super tax-effectively. Remember salary sacrifice contributions count towards your concessional contribution cap, along with any superannuation guarantee contributions from your employer and personal deductible contributions.

3. Convert your savings into super savings

Another way to invest more in your super is with some of your after-tax income or savings, by making a personal non-concessional contribution.

Although these contributions don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15% that’s paid in super on investment earnings. This tax rate may be lower than what you’d pay if you held the money in other investments outside super.

How it works

Before you consider this strategy, make sure you’ll stay under the non-concessional contribution cap, which in 2018/19 is $100,000 – or up to $300,000 if you meet certain conditions. That’s because after-tax contributions count as non-concessional contributions – and penalties apply if you exceed the cap.

Also, to use this strategy, your total super balance must have been under $1.6 million on 30 June 2018.

Remember, once you’ve put any money into your super fund, you won’t be able to access it until you reach preservation age or meet other ‘conditions of release’. For more information, visit the ATO website at ato.gov.au.

4. Get a super top-up from the Government

If you earn less than $52,697 in the 2018/19 financial year, and at least 10% is from your job or a business, you may want to consider making an after-tax super contribution. If you do, the Government may make a co-contribution of up to $500 into your super account.

How it works

The maximum co-contribution is available if you contribute $1,000 and earn $37,697 pa or less. You may receive a lower amount if you contribute less than $1,000 and/or earn between $37,697 and $52,697 pa.

Be aware that earnings include assessable income, reportable fringe benefits and reportable employer super contributions. Other conditions also apply – speak to your financial planner to find out more.

5. Boost your spouse’s super and reduce your tax

If your spouse is not working or earns a low income, you may want to consider making an after-tax contribution into their super account. This strategy could potentially benefit you both: your spouse’s super account gets a boost, and you may qualify for a tax offset of up to $540.

How it works

You may be able to get the full offset if you contribute $3,000 and your spouse earns $37,000 or less pa (including their assessable income, reportable fringe benefits and reportable employer super contributions).

A lower tax offset may be available if you contribute less than $3,000, or your spouse earns between $37,001 and $39,999 pa.

Need advice?

You’ll need to meet certain eligibility conditions before benefitting from any of these strategies. If you’re thinking about investing more in super before 30 June, talk to us. We can help you decide which strategies are appropriate for you.

Important information and disclaimer This article has been prepared by Yihsing Koo of Oak Wealth Solutions Pty Ltd and Oak Wealth Planning Pty Ltd, an authorised representative of GWM Adviser Services Limited ABN 96 002 071 749 AFSL 230692. Any advice provided is of general nature only. It does not take into account your objectives, financial situation or needs. Please seek personal advice before making a decision about a financial product. Information in this article is current as at 12 December 2018. While care has been taken in the preparation of this article, no liability is accepted by the Yihsing Koo, Oak Wealth Solutions Pty Ltd and Oak Wealth Planning Pty Ltd, GWM Adviser Services Limited or its related entities, agents or employees for any loss arising from reliance on this article. Any tax information provided in this article is intended as a guide only. It is not intended to be a substitute for specialised tax advice. We recommend that you consult with a registered tax agent.

Hi there! We are Tristan, Cindy and Harper – a little family of three who recently returned from the adventure of a lifetime thanks in no small part to the OakWealth team.