Archive for November, 2009

Over the next two weeks I will publish the words of the Commissioner of taxation Mr Michael D’Ascenzo, commenting on the actions to be taken to ensure that honest taxpayers are not penalized by the actions of a dishonest few.

Strengthening our systems to better detect and prevent refund fraud

With tax time well underway, millions of tax returns are flowing in to the Tax Office and many more millions of people are expected to lodge in the coming months.

Unfortunately, some people will attempt to take advantage of this busy lodgement period and make claims for tax refunds they are not entitled to. This sort of behaviour defrauds the community’s revenue, which is effectively stealing from each and every honest taxpayer in Australia — and that’s the vast majority of Australians.

Protecting the integrity of the tax and superannuation systems on behalf of the community is something I take very seriously. In this regard I’d like to put fraudsters on notice — you will not receive refunds you are not entitled to.

When it comes to protecting the integrity of Australia’s tax and superannuation systems I am a firm believer that prevention is better than cure.

Identifying suspicious activity and stopping fraudulent claims before they issue is far more effective than trying to re-coup refunds once they have issued.

This year we have invested in new technology designed specifically to help us identify sophisticated, organised activities through to the most basic of scams. These tools are proving to be extremely efficient at identifying suspect claims for refunds and ensuring that Australia’s revenue is protected.

Importantly, this technology is not only helping protect the revenue, but people’s identities from being stolen and used to commit tax fraud.

Of the 3.6 million tax returns already lodged up to last week, this new technology has identified more than 25,000 high risk returns worth approximately $260 million, which we are currently investigating.

We are not suggesting all of these returns are fraudulent, however they are worthy of a closer look — following investigation, we expect that a minority will be found to be legitimate and will be processed accordingly.

We strive to achieve the right balance between protecting the community’s revenue while providing legitimate refunds to people as quickly as possible.

Our use of new technology is in addition to our normal processes for checking tax returns. Every year we take a close look at returns involving claims that appear to be outside normal ranges – for example where people appear to have overstated deductions, understated income or made large one-off claims. Our significant data-matching activities also help us to identify potentially fraudulent claims.

Each year we detect fraudulent returns prepared by people acting as tax agents who are not actually registered. These people often prey on vulnerable members of the community and charge a significant fee on the promise of a hefty refund which the taxpayer is not entitled to.

Only a registered tax agent can charge a fee to prepare and lodge your tax return. Remember you are ultimately responsible for your own tax return — if you use an unregistered agent you could find yourself with a large tax bill, penalties, or even worse, the potential for your identity to be used for unauthorised purposes.

It amazes me these days that businesses try to survive without offering any type of customer service.

It my business, as an Accountant and Tax Agent, I have a varied mix of clients. Some I see once a year when they prepare their tax return, others I see every month as I discuss aspects of their business, provide bookkeeping support, tax advice and other related services. If I did not present my products and services in the correct way, the client would not return.

Examples include: a client has their tax done. They ring several months later as they need a copy of their tax return for Centrelink. There is no fee for this service but it is part of looking after the customer. The same customer may then call again for a bit of advice on negative gearing. The ‘phone call may take five minutes. As this is a once a year tax client, there is probably no charge for this advice. Again we are providing a service. Where does this take us? The client feels supported, tells their friends and through referrals our business grows. The customer comes first.

On the other side of the ledger, we have a business that does not provide customer service. I have first hand experience at this and will relate my story here so that you can decide on whether or not this supplier deserves your support, or in fact any support.

My wife & I purchased some blinds from a company called Vista Window Coverings. The cost was over $1,800. One of the windows to be covered was a Bay window. This required the installation of 3 blinds. Once installed you could see in and out of the window when the blinds were closed. We complained to Vista, and as we had paid for the product they did not want to know us. It appeared from their attitude that the blinds were only decorative and were not meant to stop prying eyes. After several ‘phone calls they agreed to send someone out to look at the blinds. The first person to call agreed that the blinds were faulty. They then sent a second person who said they were OK. How can you win?

After many more ‘phone calls, and a demand for a refund, to which they refused, they agreed to ‘fix’ the blinds. We told them the blinds could not be fixed as they were too small. They then agreed to replace the blinds. Are we getting somewhere near customer service, one can only wish. The blinds were taken on 22^nd October 2009, this is after our complaints started in August 2009 (I started keeping detailed records on 9^th September because I could see that they were not going to be helpful). When the blinds were taken we were assured that they would be replaced within two weeks, that is by the 5^th November, as our daughter was getting married on 14^th November. After 5 more begging telephone calls nothing happened. The wedding came and went and we still do not have our blinds.

Back to customer service, what does this do for Vista? I will tell everyone I see that Vista Window Coverings are, in my opinion, the worst company in Australia to deal with. If they make promises they have no intention of keeping, then how can their customers have any confidence in them. Where is the return custom?

I strongly believe in providing a service whereby the customer is satisfied that they have received the best possible service, the best advice, and have not been treated as an interruption to a coffee break. We get all sorts of funny questions asked, in some cases the word funny could be replaced by stupid, but that is not the point. The point is the client has a doubt about something and I see it as our role to remove that doubt so that the client (customer) is relaxed and, in my case, although they do not understand the complexities of the tax system, they have confidence in their tax adviser (me and my staff) that the correct thing has been done and any exposure to tax penalties has been eliminated. Of course, it is not always possible to provide a detailed answer within a day or two so the client has to be kept informed of what is happening in order to reduce their stress levels.

It is all about the client (customer) because without them there is no business. It is a shame that some businesses, such as Vista Window Coverings, are so wrapped up in their own importance they cannot see the damage they do to their business by their own arrogance.

Clients are often confused as to how long and what records need to be kept to comply with the A.T.O. Confusion can arise as the A.T.O requires some records to be kept for five years and others seven years from the date on that year’s Notice of Assessment issued by the A.T.O or where no assessment is issued from the date of lodgment of the tax return.

• Five years; non-Company records, generally individuals and non-company entities that do not have employees.
• Individual tax payers should keep records for five years. If you have a rental property then you should keep all records for a further five years after the rental property is sold.
• Seven years; financial records for companies, most employee records and all records of fringe benefits and capital gains.
• If you store financial records electronically you must be able to produce a hard copy if required.
• Employee records may need to be kept longer to comply with Workers Compensation Act.
• For depreciating assets, you must keep records for the entire period over which you claim deductions for the decline in value of those assets. You must keep your records for a further five/seven years from the date of your last claim.

If you organise your records weekly including updating your registers and filing the documents away you will reduce stress and stay on top of the task. It also allows you to find documents easily when needed.

Following is a list of ‘typical’ information required to be kept for between five & seven years, although the list is typical information used by business’ not every business will use every one.

• Tax invoices
• Cheque butts
• Income Tax Returns
• Credit card receipts
• Profit & Loss’
• Credit card statements & merchant statements
• Balance sheets
• Loan documents
• Business Activity Statements
• Petty cash book and receipts
• Depreciation Schedule
• Stock Take Register
• Vehicle log books and expenses
• Registrations, permits and licences required to run the business
• Fringe Benefits Tax
• ASIC documents
• Accounts receivable (your debtors)
• Wages and salary records
• Accounts Payable (your creditors)
•  PAYG withholding and superannuation records
• Bank statements/deposit books
• Payment Summaries
• Cash receipt book or journal
• Superannuation payments
• Cash Register Z totals
• Tax file number declaration forms
• Cash sales receipt books
• Timesheets, pay slips, and wages
• Summary cash receipts books
• Workplace agreements, awards and contracts
• Cash payments book and receipts
• Workers Insurance
• Workplace injury register

Further information is available from the Tax Office website.

Did you know… every year the ATO issues a list of occupations that they will monitor for audit purposes, without fail the poor dedicated teacher is targeted. In this article we will outline some do’s and don’ts when preparing your tax return.

If you are an employee teacher, tutor, early childhood, primary, secondary, special education, technical and further education (TAFE) or relief teacher, some of the deductions you may be able to claim and others that are not claimable are identified below.

Clothing that is used to protect your other clothes (apron/lab coat, steel capped boots), and specific uniforms may be deductible. Other items to consider if your work requires you to work outside include; hats, sunglasses and sunscreen. No deduction is available for items such as plain tracksuits or joggers even if you are a physical education teacher. Laundry costs are generally only available where a deduction for clothing is allowable.

Cost of excursions, school trips/camps are deductible if these have an educational benefit and are related to the curriculum or extra curriculum of the school – unfortunately no deduction is available for teachers attending school functions or social dinners. You can also claim teaching aids used for work, this does not include gifts to students or items bought for a single student. The item needs to be used as a teaching aide for all students.

Education expenses relating to your occupation are deductible. These are the costs you incur in attending seminars, conferences, education workshops or training courses. As well as relevant courses held by a college, university or other place of education. Self-education expenses can include textbooks, stationery, student union fees, course fees; certain travel expenses and the decline in value of equipment to the extent that they are used for self-education purposes. In certain circumstances you may have to reduce your deduction for self-education expenses by $250.

Motor vehicle and travel expenses can be claimed for allowable travel by a teacher say to attend seminars or courses relating to employment, there are four ways you can  work out your motor vehicle deduction, please refer to the ATO website for further information (or ask us when you next visit).

Other items you may be able to claim a deduction for include;

• First aid courses, provided you are a designated first aid person.
• Home office expenses relating to running a home office that is used to help you produce your income.
• Answering machines, mobile phones, pagers, calculators, electronic organizers and
• dedicated stop watches (not ordinary wrist watches) including the cost of purchase or depreciation, repairs and batteries.
• Allowable meal deductions
• Interest on monies used to purchase work related equipment, telephone costs
• Professional library, Technical and professional publications but not newspapers
• Union and subscription costs relating to your work.