Davidsons manager Michael Rebula joined radio host Rob Cameron on 94.7 The Pulse to discuss tax time tips, the pros and cons of the ATO’s data matching program, and the benefits of using an accountant at tax time. Check out the audio recording or read the full transcript below.
Transcript: Davidsons’s Michael Rebula speaks with Rob Cameron on 94.7 The Pulse
Rob Cameron:
We’re going straight to sponsor of the station, Davidson’s Accounting. It’s tax time. We’re going to learn about what’s happening, and coming into the studio as normal is Michael Rebula. Good morning and welcome.
Michael Rebula:
Hi, Rob. Good to be back.
Rob Cameron:
Good to have you back. It’s an important time, tax time. In the old days, it used to be quite a scary time for we PAYE folk having to gather up all that information. It’s changed a lot, but the role of the accountant in getting back the best possible tax return probably hasn’t changed all that much.
Michael Rebula:
No not at all I think you’re right, now is a busy crunch time. People look at it as an opportunity to get a tax refund and hopefully get some extra cash to help out in the current climate. Cash is a bit troublesome and it’s going to be handy in people’s pockets this time of year.
In terms of tax change, yeah, it has changed probably over the last 10 or so years in terms of the accountant’s role. It’s probably moved from a role of the accountant having to help gather all your pay slips and your interest and all the income sources and deductions. But now, due to rapid technology increases on the ATO side, it’s moved to a data matching platform. The ATO is across all your salary and wage income, your share interest, interest income, your share dividends, all those kinds of things.
So, the account role has changed from collation and data input to asking really good questions to try and maximise those refunds, making sure you’re claiming all the deductions that you’re entitled to claim. And the other element of the accountant’s role is to make sure that you’re not claiming things that you shouldn’t. As a person doing their own tax return, they might be a bit more aggressive and claim things that maybe they can’t and the last thing you want is the ATO tapping you on the shoulder asking you to substantiate things or saying, ‘Oh, you shouldn’t have claimed that’, and potentially being hit with interest or penalties.
Rob Cameron:
So, there are lots of different taxpayers. I imagine there are young people working part-time that are never going to reach the threshold, which I think is $19,800?
Michael Rebula:
$18,200 is the threshold.
Rob Cameron:
So, if someone might earn $18,000, if they’ve paid tax, they’re entitled to get it all back. So that’s a simple one. Then there are others that may have multiple jobs, and that’s where it gets a bit technical. I know I got caught out one year myself when I was claiming the lower threshold on each of the jobs and that came back to bite me, and I actually had a bill. You’ve got to watch out for that a little bit.
And also, if you’ve got other business interests that tie in. In my case, I do a little bit of agricultural work on the side of the normal wages. So, there’s different types and I suppose you’ll have different tactics to manage these different styles, but it’s important that people seek the right information before they make that decision about, ‘Oh, I can do my own tax, it can’t be that difficult’.
Michael Rebula:
Yeah, definitely. And our role as accountants too is helping you where you’ve got those more passive income sources like the ones you’re talking about. So, where you’ve got business interest or interest income or rental properties that you might be earning taxable income from; these income sources where you might not be paying tax as a prepayment throughout the year. So, for example, when you earn a salary and wage, your employer withholds a portion of your salary and pays it to the ATO to cover the tax for when you lodge your tax turns.
But these passive income sources, no one’s doing that for you – you earn the profit, you pay the tax on it. Some of our clients with these additional income sources do get caught out by the end of the year. They’ve earned all this extra income. No one’s prepaid tax on it. They lodged a tax return, and they’ve got a payable debt.
So that’s our role; we can manage those tax expectations well in advance. Rather than getting to tax lodgement time and saying, ‘Hey, here’s a $5k or $10k tax bill’, we can have those conversations earlier and make sure there are no surprises. And hopefully we can be in position to maximise deductions to reduce that tax debt.
Rob Cameron:
The ATO tax portal is another good thing too. Some people think it’s intrusive that the taxation department knows so much about our business, but I think it’s a good thing. It gives you the opportunity to manage your circumstances so much easier with the portal knowing what your tax burden is with the press of a button, but it’s then it’s the role of the accountant to make those adjustments to say, ‘Well, hang on a minute, there are some issues over here that will probably reduce the tax amount’.
Michael Rebula:
Big Brother is watching more than ever now. From the ATO side, as you’re saying, they get access to most of your income sources, including your salary, interest, source of share income, those kinds of things. But they’re not 100%. Their systems are still getting up to date, certainly with the crypto side of thing and investments. The ATO is still working on getting that data matching up to scratch.
We know that there’s going to be a point where they’ll be across every transaction that happens throughout the year. And so, the accountant’s role is to make sure that, even though the ATO might not have that information now, we’re still disclosing that information. Because at some point, once they’ve figured out all the data matching platforms, the ATO will be able to retrospectively go back to make sure nothing has been missed in the past. So, as accountants, we make sure we’re capturing all that now so there are no issues four or five years down the track.
Rob Cameron:
Just for people that are new to this, the cost of a taxation planning, I guess, is still somewhere between a $150 and $250 commitment back to the taxation officer for doing it. But you can recoup pretty quickly just by having some deductions that the taxpayer may not be aware of.
Michael Rebula:
Yeah, absolutely. And that’s our role. If you’re not going to be saving at least $150 by coming to an accountant, do you just do it yourself on the portal? But there are absolutely a lot of deductions that get missed. Like the use of a motor vehicle – that’s one easy deduction that we work through, whether it’s a logbook method or claiming or a cents per kilometre method.
There’s been a changed landscape for salary and wage earners in recent post-COVID times with working from home deductions, whether you’re using the ATO’s flat rate of claiming per hour or you’re claiming a workspace from home. There are a few different options to work through with your accountant, but these are a couple of little things that come to mind in terms of getting the best bang for your buck with your tax return refund.
Rob Cameron:
One of the conversations I’m personally going to have – and I reckon there are a lot of other people in this day and age that are going to have it – when you reach retirement age but continue to work. It’s pretty common. The working age has been pushed out, in my case, to 67 years of age rather than 65 which was the standard. Superannuation is then accessible. So, you’re taking a little bit of a divvy out of the interest in your super to support a lifestyle but you’re still working as well.
Again, I suppose that crosses over taxation obligations, which you probably wouldn’t be aware of yourself and may need to sit down and have a chat with an accountant.
Michael Rebula:
Yeah, absolutely. Those thresholds are really important in terms of the age that you’re taking super out. We call that ‘preservation age’. I’m not a super expert, but if you’re taking funds out of your super and you’re still working below that particular age, then there’s going to be a tax consequence for doing so. So, it’s being aware that normally there’s a withholding component from what you take out to hopefully cover the tax, but it won’t always be.
So, as you’re saying, talk to your accountant, be aware of the tax obligations of doing so and then make the call from there rather than retrospectively doing it.
Rob Cameron:
Do you still get a bit of a buzz out of dealing with the different circumstances that pop up? You’ve got to be across the laws, and each client that comes in has different elements to their lifestyle or their financial package. Does that keep you on your toes and make going to work interesting?
Michael Rebula:
Yeah, for me personally, I think that’s one of the joys and why I love doing what I do. There are so many different people and jobs. You can literally service anyone and hear so many different stories around why people do what they do every day.
Certainly with us, we get clients that work industries, and that helps. Say it’s a teacher that comes in, we know that there will be a certain level of deductions for that teacher, or if it’s a builder etc. There are different categories that we can work towards. So, for me, it’s one reason I love doing what I do – just the different people that you meet and the interesting stories that you hear.
And if I can help them create their after-tax wealth to build something better with their families, that’s why I do what I do.
Rob Cameron:
Some of the things people can claim for that they’re probably not aware of – this is the important thing that you would have advice on. What are some of the more unusual ones? You mentioned use of your own vehicle. When does that actually kick in to being deductible as opposed to just your own obligation?
Michael Rebula:
So, with the vehicle, there are two methods that you can claim on a vehicle. The one that a lot of people think about straight away is the 5, 000 kilometres, thinking, ‘I’m going to claim that every year’. You just keep a diary of the kilometres that you do throughout the year, and you can claim it, no problem.
The other method that can be really effective if you’re using your vehicle quite a lot is the logbook method. Essentially, you fill out a logbook for a 12-week period throughout the year that you’re working. Typically, most people pick the busiest time that they’re working in the year. And, using their odometer readings, that logbook will give them a percentage that they’re using their vehicle for business. And let’s say it’s an 80% business portion, you can then claim 80% of your actual running costs of the vehicle throughout the year. So, 80% of your fuel, insurance, services, all those things.
And the deduction that you get from that method of claiming might be $1000, $2000, $3000 more than the cents per kilometre method.
Rob Cameron:
So this is just driving to work under normal circumstances, not using your car for work-related purposes, just simply getting from home to your workplace?
Michael Rebula:
No, so the rules specifically exclude that. The business percent that we’re talking about, if you’ve got a predominant workplace that you work at, like an office that you’re going to work in most days, then you can’t claim travel from your home to work. So, some people, if they’re in Geelong and they commute to Melbourne, they say, ‘I’m using my car to drive to Melbourne, I’m in the car 3, 4 hours a day’. But unfortunately, if you’ve got a place of work in Melbourne, then you can’t claim the driving to and from.
It’s a little bit different if you’re working from home and your primary place of work is home, but you still have to travel to clients, to go and do on-site things – that would classify as the business use that we’re talking about.
So again, it comes down to the specifics around where’s your primary place of work, what are you doing on a daily basis, who are you going to see, etc.
Rob Cameron:
Well, there in itself is reason for a conversation with an accountant, and it could actually be quite beneficial to have it.
Michael Rebula:
You’re talking thousands of dollars, it could really affect your refunds.
Rob Cameron:
So, for those of you listening who may be new to this horrible world of, or sorry, this wonderful world of tax: if you don’t know, ask, don’t make it up, don’t guess.
Could you be doing the wrong thing and getting yourself into trouble or be doing yourself an injustice by not taking advantage of circumstances that are available to you?
I spoke to you off air, we’ll do it again on air, but one of the concerns I used to have, which I’m pleased is changing, is the employers’ obligations to pay your tax that they take out and to pay your superannuation. For a long period of time, it didn’t seem to be anything other than a moral obligation and quite often people were caught out. And I know from personal experience that sometimes superannuation was just not paid, forgotten about and completely gone. What’s in place now to make sure that’s not such an issue?
Michael Rebula:
Yeah, sure. A bit of context is that, as an employee, your employer has an obligation to pay a percent of your wages in super. That’s 11.5% superannuation on top of your wages at the moment. And essentially, they accumulate that for a quarter, and they have 4 weeks after quarter end to physically pay the super into your super fund account.
And so for a lot of business owners out there, you’d accumulate all this super throughout the quarter, get to the end of the quarter, you’ve had to pay your creditors and your GST and all these things, and then you get to the end of the quarter and what’s the first thing that doesn’t get paid? Super was typically one of them.
The ATO was aware that was happening, so they put a lot of resources into data matching to make sure that they’re notified when that superannuation obligation doesn’t happen by the due date. And essentially, they’re issuing notices to employers to put them on notice to say, ‘Hey, we know you haven’t paid on time, make sure you pay now or else there’s going to be interest and penalties and things that you have to pay’. So, it’s never been more important for employers than it is now to make sure they’re meeting those super obligations. There was always the risk that, what if the company or the entity just walks away? They can just wipe their hands of all their debts and walk away.
The Government identified this risk, and they put a scheme in place where, let’s say, an employer has a debt of $50k for all its employees’ superannuation obligations. If a company is getting wound up because of debts, the government essentially comes in and pays out the $50k to the employees so they don’t lose out on their super and annual leave entitlements. And then the Government becomes one of the creditors instead of the employees. So, it’s good that the Government’s trying to look after the employees.
Rob Cameron:
Yeah, well you mentioned Big Brother before, and we have complaints about it, but there are also some good stories out of it. This is clearly a good one, that someone else is watching, because in the past you were just relying on the honesty of your employer to do it. And when you have multiple employers, like the business that I was in in the past, it’s hard to track it yourself. And if you miss a few, well, they’re gone forever.
Michael Rebula:
And trying to get it through Fair Work and those avenues, it’s really hard for the employee to do that. So, it’s great that the ATO’s kind of the regulator in this space.
Rob Cameron:
So, Davidson’s Accounting, they can be found in West Fyans Street, South Geelong, no, Chilwell, Newtown, whatever you like to call it… down that end near the river.
If you’ve got some questions, if you haven’t gotten around to doing your tax yet, which I think we’ve got till the end of October…
Michael Rebula:
Yes, 31st of October. But if you do have an account from the previous year, you actually have until the 15th of May next year to get it done.
Rob Cameron:
Excellent. Michael, thank you so much for your support. Thank you for your business support of this station. We’ll be talking a lot about support for the Pulse in a little while, but we appreciate yours. I enjoy these conversations because they always fill me with a little more knowledge that I didn’t have before you come in. So best wishes to you and your organisation.
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