- CPA Australia has published our 2020-21 Tax tips for employees
- Assume the ATO has full line of sight on your income and don’t poke the bear.
- Workplace deductions are the biggest source of taxpayer errors and missed refunds.
- Many employees’ 2020-21 tax returns will include COVID-related deductions.
CPA Australia’s top tip for employees this tax time is “Don’t poke the bear.” Australia’s leading professional accounting body says a sure-fire way to do this is to omit income from your tax return.
Senior Manager Tax Policy Elinor Kasapidis says, “Most transactions where money changes hands leave a digital footprint and the ATO has even greater information gathering powers than the police.
“If you’re thinking of playing hide and seek with the ATO, don’t expect them to close their eyes and count to ten. Assume they have full line of sight on your income and don’t poke the bear.”
Other than accountants, Kasapidis agrees that most people don’t find doing tax fun. But she says it’s worth reminding ourselves of the value of paying taxes and what we receive in return.
“People sometimes forget that paying tax is a good thing. The past 18 months is a great reminder of why we do it. The economic stimulus that kept millions of Australians and small businesses afloat during the pandemic is being paid for with our taxes.”
Each year CPA Australia publishes tax tips for different categories of taxpayers. Today we published our tax tips for employees.
Kasapidis says, “It’s legal to maximise your tax refund and that’s what we’re trying to help people do. It’s not legal to avoid paying tax, so we’re also trying to help people avoid breaking the law.”
According to Kasapidis, Australia has one of the most complex tax systems in the world, but for most employees it boils down to a few simple principles:
- If you earned money, you need to report it.
- If you can't prove an expense, you can’t claim it.
- If you want to make sure you’ve got it right, see a tax agent.
“Employees’ starting positions should be, if you earned money, you need to report it. Then claim your deductions and pay tax on the difference.
“Claiming deductions for work expenses is the single biggest area where people go wrong; both by claiming too much or not enough. The way the tax system works, if you don’t claim a deduction, you won’t get it. Plenty of people miss out because they didn’t know to ask. Don’t copy and paste last year’s deductions into this year’s return; it’s another surefire way to poke the bear.
“You can cut your own hair, but you’ll get a better result if you see a professional. It’s the same with completing your tax return. If you see a tax agent, you can be confident you’re paying the right amount of tax and getting the maximum refund you’re entitled to.”
CPA Australia has around 6,000 registered tax agents. Click here to find a CPA Australia registered tax agent.
COVID-19 tax issues
COVID-19 continues to have a significant impact on taxpayers’ incomes. “This is the first full income year in a COVID-environment. We expect many employees’ tax returns will include COVID-related items.”
Employees who spent time working from home may be entitled to claim a deduction for expenses such as electricity and the internet. “The ATO’s shortcut method is suitable for many taxpayers and will save time and effort.”
Other methods may be more suitable for employees who’ve spent a larger amount on home office expenses, such as furniture and air-conditioning. “Tradies are often familiar with depreciation on tools and vehicles, but many white-collar workers haven’t used this deduction before and may overlook it.”
Employees who lost their jobs or worked reduced hours may have received a mix of government allowances, salaries and redundancy payouts during the financial year. “It may come as a surprise to many people to learn that their JobSeeker and redundancy payments are taxable.”
Some work-related expenses are less likely to appear in employees’ tax returns this year. “COVID-19 has significantly decreased international and interstate trips as well as local travel. The ATO is expecting reduced travel and motor vehicle expenses and will be checking unusual claims.”
Read our Tax tips for employees
Dr Jane Rennie
General Manager External Affairs
T: +61 425 869 017
E: [email protected]
ATO steps up efforts to reclaim debt
If your clients have ATO debts, or have failed to lodge returns, it has a simple message – “get in touch”.article
TPB review: What it means for tax practitioners
The final report of the Review of the TPB has many noteworthy recommendations but more consultation is needed on implementation.article
This subject provides you with leading-edge, specialised training in the area of Singapore taxation
Taxation study options
Recent changes to taxation study in the CPA Program mean that it’s easier to choose the subjects that suit your career goals
ATO’s data matching ramps up and focuses on SME reporting
Here’s how to ensure your clients are correctly accounting for their income and use of assets.article
New Zealand’s Inland Revenue targets tax compliance burden
IRD seeks input from tax practitioners and professional bodies as part of its bid to improve service.article