IPA issues tax time warning: Lodge early at your peril
The IPA has warned taxpayers of the added challenges associated with lodging their taxes early, particularly this year.
With the end of the financial year fast approaching, some taxpayers are looking to lodge their 2019 tax returns in July.
The Institute of Public Accountants (IPA) understands that there is a strong incentive to lodge early, but warns that there are two added complexities at play this year.
Firstly, Parliament needs to pass the announced increase in the low and middle income offset, which applies for the 2019 income year. Eligible taxpayers can receive up to an extra $530 for singles or $1,080 for a couple.
The ATO has, however, stated that it cannot process the higher amount until the law is passed, but will be able to automatically amend a return if the law changes after a taxpayer receives their assessment.
Secondly, single touch payroll has come into operation.
"Some employers no longer need to provide a payment summary to employees as this information can now be accessed via myGov," IPA general manager of technical policy Tony Greco said.
"The information available in early July may not be accurate until the employer completes a finalisation process. Until this happens employment income will show a notation 'tax not ready'."
He noted that, consistent with prior years, third-party data (dividends, interest and share disposals) is progressively uploaded onto the ATO systems during the month, meaning that it normally takes some time for the pre-fill information to be finalised. The ATO also has the right to auto-amend a return for discrepancies.
"Our advice is that unless you have certainty and completeness around the information used to finalise your return, we are encouraging all taxpayers to rethink lodging returns early this year, especially in light of the above changes," said Mr Greco.
He also called for caution in regard to work related deductions (WRE), which have come under additional scrutiny prompting the ATO to use tools such as data analytics to highlight possible over-claiming.
"The tax gap for individuals of $8.7 billion has been largely caused by overstatement of WRE. Random audits have revealed high error rates from both agent and non-tax agent returns," Mr Greco said.
"Taxpayers need to be constantly reminded that our tax system relies on self-assessment, so the buck stops with the taxpayer."
The IPA advised taxpayers who are unsure of their obligations to seek professional help.