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Every year, the ATO targets people and organisations who are trying to evade their tax obligations or who try to make claims they don’t realise are not valid.
The following are target areas for the ATO this year.
Sham not-for-profits
Some people are setting up fake not-for-profits as a way to avoid paying tax. The ‘scam’ is to set up a private foundation as an individual or business and then use it to evade tax obligations.
If you have an accountant or advisor who has recommended you go down this road, get a second opinion; the tax department is on the lookout for charities that aren’t really charities.
Genuine not-for-profit (NFP) organisations are also being warned not to try to dodge responsibilities when it comes to things like Fringe Benefits Tax (FBT). As reported recently in Accountants Daily, Assistant Commissioner Jennifer Moltisanti said the tax department is “concerned with arrangements where employees of PBIs (public benevolent institutions) are used to undertake charitable or commercial activities of other entities that are not benevolent in nature”, and that the ATO will “examine any arrangements with the sole and dominant purpose of avoiding or reducing FBT.
NFPs are encouraged to review their FBT claims to make sure there haven’t been any unintentional mistakes.
GST fraud
Over the last few years, some individuals have been talked into setting up a ‘business’ so they can falsely claim GST refunds. ‘Recruiters’ to this scheme tend to operate on social media. Once the ATO identifies the GST fraud, a criminal conviction and jail time awaits the fraudster.
Even if you are convinced to do it by someone else, operating outside the rules of the tax department can land you in hot water. Setting up a pretend business because someone you meet on social media tells you to do so won’t be an excuse.
The tax department is aware of this ‘trick’ and has already been able to save itself from paying $2.5 billion in ineligible refunds. You can read more in the Financial Review.
Inappropriate landlord/investor claims
Mortgage interest rates are starting to really pinch, which has some property owners trying to push the envelope in terms of deductions.
There are a number of tax deductions available to investment property owners, but of course, they do have to be within the guidelines. According to one report, people have landed themselves in hot water for trying to claim the borrowing costs of their family home in conjunction with their rental property, which is a no-no.
If you have a single loan covering your home and investment property it can be tempting to try to claim all the interest you pay, but be warned that only the interest component that relates to the investment property is tax deductible.
The other area where the ATO is cracking down is couples using investment property expense claims to try to reduce the income of the higher earner, rather than splitting costs 50/50.
It’s easy to understand why tax becomes confusing for investors and why a savvy accountant is a must-have. You don’t want to end up with a detailed review because you have tried to claim too much.
Holiday homeowners
Finally, the blurry lines between investment properties and holiday homes are also in the sights of the ATO in 2023.
You can’t claim 100% of your holiday home expenses if you are only renting it out occasionally. The tax commissioner has said that often people who own these types of properties sometimes fail to provide accurate information, which can lead to tax agents getting things wrong without realising.
Avoid an ATO crackdown
Honesty is the best approach when it comes to tax time. A quality tax accountant will work with the numbers they have to ensure you are claiming the maximum tax deductions possible, legally.
Crest Accountants can make sure your tax claims are legitimate and accurate. Contact us to find out more today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.
