Author Archives: experttaxadmin

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Wash sales: How does it work?

 

Wash sales typically involve the disposal of assets such as crypto and shares just before the end of the financial year, where after a short period of time, the taxpayer reacquires the same or substantially similar assets. This is a wash sale and is done to create a loss to offset against a gain already derived, or expected to be derived, in certain circumstances, in a tax return.

 

A wash sale is different from normal buying and selling of assets because it is undertaken for the artificial purpose of generating a tax benefit for the current financial year. The taxpayer disposes of and reacquires the asset for the deliberate purpose of realising a capital gains loss and obtaining an unfair tax benefit.

 

The ATO’s sophisticated data analytics can identify wash sales through access to data from share registries and crypto asset exchanges. When the ATO identifies this behavior, the capital loss is rejected, resulting in an even bigger loss to the taxpayer.

 

The Australian Taxation Office (ATO) is warning taxpayers to not engage in ‘asset wash sales’ to artificially increase their losses and reduce gains or expected gains. Wash sales are a form of tax avoidance that the ATO is focused on this tax time.

 

The ATO is warning taxpayers who may be engaging in wash sales are at risk of facing swift compliance action and additional tax, interest and penalties may apply. Taxpayers are urged to ignore any advice encouraging a wash sale of any asset. The clear advice from the ATO is to check with an independent registered tax professional and not to rely on advice you may receive through media, social media, or advertisements. If something seems too good to be true, it probably is.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for further guidance regarding tax avoidance provisions.

 

Don’t let these Tax Time myths slow down your return

At a time when many people want the tax refund that they are expecting to arrive quickly, the Australian Taxation Office (ATO) is warning people not to get tripped up by tax time myths that slow down returns.

Usually, tax returns lodged electronically are processed in less than 2 weeks.

 

Top tax time myths for 2022

 

Bank details don’t update themselves

 

While ATO receive information from banks, this doesn’t extend to updating details for the bank account you nominate to have your refund deposited into. Last year many people in their rush to lodge early forgot to update bank details and delayed their refund.

 

It’s not okay to double dip

 

ATO is concerned that some taxpayers may either accidentally or deliberately double dip by claiming their working from home expenses using the all-inclusive shortcut method while also claiming for specific items such as laptops or desks.

 

It’s important to remember that if you’re claiming under the shortcut method, you cannot claim a separate additional deduction for any expenses you incur as a result of working from home.

 

Home to work travel is not claimable

 

Generally, most people cannot claim the cost of travelling from home to work unless you are required by your employer to transport bulky tools or equipment and there is not a safe place to store these at your workplace.

 

If you are working from home due to COVID-19, but need to travel to your regular office sometimes, you still cannot claim the cost of travel from home to work as these are still private expenses. Even though you are working from home, your home is still a private residence – it is not a ‘place of business.

 

You can’t just claim $300 or $299 if you had no expenses!

 

ATO often see people claiming a deduction despite not purchasing anything. When ATO question them, they often find it’s because they thought everyone is entitled to claim $300.

 

“While you don’t need receipts for claims of expenses up to $300 but you must have actually spent the money and be able to show us how you worked out your claim.”

 

Work-related expenses need to be work related!

 

Each year people claim personal expenses under the guise of work-related expenses, but you can only claim for expenses that are directly related to earning your income.

 

ATO have been reminding taxpayers recently that if they are in jobs that require physical contact or close proximity to customers and they had to buy their own hand sanitizer, gloves or masks for use at work, that they can claim these items.

 

“However, people who aren’t in jobs that aren’t in close proximity to the public or people who have purchased these items for their general use, cannot claim these items.

 

“For example, people who are working from home can’t claim these items and so a high work from home claim together with a large claim for protective items may trigger a red flag and slow down your return.

 

“People also cannot claim for the costs of setting their children up for home schooling. These costs are private expenses.”

 

Lodging earlier doesn’t always mean getting your refund earlier

 

Each year the ATO automatically includes information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) in people’s returns. For most people this information is ready by the end of July.

 

Since leaving out income can slow your return down, if you are lodging before we have automatically included this information for you, it’s really important that you ensure you include all of the information.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for lodgement of your personal and business tax returns.

Record keeping for cryptocurrency

It is vital to keep good records for all your transactions with cryptocurrency, whether you are using cryptocurrency as an investment, for personal use or in business.

 

You need to keep the following records in relation to your cryptocurrency transactions:

  • the date of the transactions
  • the value of the cryptocurrency in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
  • what the transaction was for and who the other party was (even if it’s just their cryptocurrency address).

The sorts of records you should keep include:

  • receipts of purchase or transfer of cryptocurrency
  • exchange records
  • records of agent, accountant and legal costs
  • digital wallet records and keys
  • software costs related to managing your tax affairs

Keeping good records will make it easier to calculate and meet your tax obligations, and if you are in business, record keeping will assist you to manage your cash flow and see how your business is doing.

 

Expert Tax can assist with reporting of crypto transactions on your tax return. Contact us on 0449 952 855 or 1300 869 829 for assistance.

 

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