From Daily Telegraph, Sydney
Where Tax Office will look hardest
By TORY MAGUIRE
19may03
THE Australian Tax Office plans to blitz income tax returns for claims and omissions from rental property investments, share portfolios and work-related expenses.
It is also warning against trying to reduce tax bills as the end of the financial year approaches by turning to last-minute minimisation schemes and pricey seminars.
Tax Commissioner Michael Carmody said the ATO was concerned about three types of tax-haven business arrangements that could see taxpayers stuck with a bigger than expected tax bill as well as a dodgy investment.
The basic premise "if it sounds too good to be true it probably is" underpinned the ATO's pre-year-end advice.
"People considering end of year investments should be wary of any product or scheme promising big tax breaks as a major selling point," he said.
"Any investment decision should not be based purely on claimed tax benefits. It should make sound business sense.
"It is also a good idea to check if an investment product has an approved Tax Office product ruling."
Mr Carmody highlighted three main concerns, investments involving funds transfers to offshore tax havens, superannuation-based schemes offering access to funds before retirement age and pre-paid service warrant schemes currently being promoted by some lawyers and accountants.
"Investors should also be wary of satellite seminars or wealth creation seminars that offer to reduce your tax burden or that market investment schemes offering small cash outlays and large tax deductions."
ATO Assistant Commissioner Tony Goddard said there were three areas his auditors would be focussing on once 2002-03 claims were lodged.
"We expect in 2003-4 our compliance program is going to include a focus on rental deductions and expenses.
"If you are a property owner, the issues there would be making sure you have got all your documentation, you know what deductions you can claim, you make sure you return your income you receive from rental properties."
Maintenance on a property you own and rent out is tax deductable but capital improvements are not.
The second area of focus will be interest and dividends on investments.
"In the ATO we do data matching," Mr Goddard said. "There is a whole lot of financial information that is provided externally to the ATO.
"We compare what the external source of information says against what is in the tax return."
The third area was work-related expenses such as car use, uniform laundry and self education.
"Our overriding policy is that, if it is a first time error and it is an honest mistake, you will find that the auditor will be very relaxed on penalty.
"Where we find someone has been reckless, or perhaps they have been aware of it and have not followed the rule or perhaps there is evidence from the past that this is a repeat offence then you are likely to be getting into the area of penalties."
DEDUCTIONS WATCH
The three main areas of focus for ATO auditors looking at individual's (not businesses) tax returns:
Investment properties – all rental income must be declared, only maintenance expenses deductable
Interest and dividends – on all investments must be declared, the ATO data matches your tax return with information from external sources relating to your investments
Work related expenses – like car use, uniform laundry and self education
Where Tax Office will look hardest
By TORY MAGUIRE
19may03
THE Australian Tax Office plans to blitz income tax returns for claims and omissions from rental property investments, share portfolios and work-related expenses.
It is also warning against trying to reduce tax bills as the end of the financial year approaches by turning to last-minute minimisation schemes and pricey seminars.
Tax Commissioner Michael Carmody said the ATO was concerned about three types of tax-haven business arrangements that could see taxpayers stuck with a bigger than expected tax bill as well as a dodgy investment.
The basic premise "if it sounds too good to be true it probably is" underpinned the ATO's pre-year-end advice.
"People considering end of year investments should be wary of any product or scheme promising big tax breaks as a major selling point," he said.
"Any investment decision should not be based purely on claimed tax benefits. It should make sound business sense.
"It is also a good idea to check if an investment product has an approved Tax Office product ruling."
Mr Carmody highlighted three main concerns, investments involving funds transfers to offshore tax havens, superannuation-based schemes offering access to funds before retirement age and pre-paid service warrant schemes currently being promoted by some lawyers and accountants.
"Investors should also be wary of satellite seminars or wealth creation seminars that offer to reduce your tax burden or that market investment schemes offering small cash outlays and large tax deductions."
ATO Assistant Commissioner Tony Goddard said there were three areas his auditors would be focussing on once 2002-03 claims were lodged.
"We expect in 2003-4 our compliance program is going to include a focus on rental deductions and expenses.
"If you are a property owner, the issues there would be making sure you have got all your documentation, you know what deductions you can claim, you make sure you return your income you receive from rental properties."
Maintenance on a property you own and rent out is tax deductable but capital improvements are not.
The second area of focus will be interest and dividends on investments.
"In the ATO we do data matching," Mr Goddard said. "There is a whole lot of financial information that is provided externally to the ATO.
"We compare what the external source of information says against what is in the tax return."
The third area was work-related expenses such as car use, uniform laundry and self education.
"Our overriding policy is that, if it is a first time error and it is an honest mistake, you will find that the auditor will be very relaxed on penalty.
"Where we find someone has been reckless, or perhaps they have been aware of it and have not followed the rule or perhaps there is evidence from the past that this is a repeat offence then you are likely to be getting into the area of penalties."
DEDUCTIONS WATCH
The three main areas of focus for ATO auditors looking at individual's (not businesses) tax returns:
Investment properties – all rental income must be declared, only maintenance expenses deductable
Interest and dividends – on all investments must be declared, the ATO data matches your tax return with information from external sources relating to your investments
Work related expenses – like car use, uniform laundry and self education
