With Tax Time 2020 just around the corner, many individuals on reduced income or have increased deductions may be eager to lodge their income tax returns early to get their hands on a refund. However, the ATO has issued a warning against lodging too early, before all your income information becomes available. It notes that employers will have until the end of July to electronically finalise their employees' income statements. This timeframe similarly applies to other information from banks, health funds and government agencies.
If you're a retail or hospitality worker, 2020 has perhaps not been the best year. However, as with everything, there is a silver lining, with tax time just around the corner, you may be able to get a larger refund than usual. This is due to either being on reduced incomes or having the ability to claim a wider range of deductions, such as deductions for protective equipment (eg gloves, face masks, sanitiser or anti-bacterial spray), or for some, a combination of both.
"This tax time the ATO expects to see a substantial increase in people claiming deductions for working from home or for protective items required for work" – Assistant Commissioner Karen Foat.
With so many different types of incomes and expenses affecting tax obligations this income year, the ATO is taking a range of different approaches to support taxpayers and the community through tax time. In addition to updating published information on the website, the ATO is also encouraging taxpayers to search its online "ATO community" for any information that is not listed on its website. The community forum operates 24 hours a day and contains "ATO-endorsed" responses.
Remember also, for most people, income statements have replaced payment summaries. So, instead of receiving a payment summary from your employer, the income statements will be finalised electronically with the information provided directly to the ATO. The income statement can be accessed through myGov and the information is automatically included in your tax return if you use myTax. Tax agents will also have access to this information.
Although you may be eager to lodge as soon as possible, the ATO has warned against lodging your return too early (ie as soon as the new income year rolls around), as much of the individual information on income may not be confirmed until later. For example, the income statements which show year-to-date salary and wages, PAYG withholding tax, and employer super contributions may not be finalised by employers until 31 July.
According to the ATO, it is important to wait until the income statement is finalised before lodging a tax return to avoid either delays in processing or a tax bill later on. You income statement will be marked "tax ready" if it is finalised. Other information from banks, health funds and government agencies are also expected to be ready by the end of July and will be automatically inserted into your tax return.
If you still choose to lodge early, the ATO advises that you review any information that is pre-filled and confirm that it is correct and that you wish to use it. You will also be required to acknowledge that your employer may finalise your income statement with different amounts and that you may need to amend your tax return and additional tax may be payable.
If you would like to…
Lodge early? We can help you work out the best estimate of your income for the year from the various sources to minimise the chance of paying additional tax. If you're not sure about the amount of deductions you can claim this year, we can help you work that out, contact us for expert advice.
