Accountant Vs ATO Calculator: Who's Right?

peterpeterpumpkin on 17/09/2018 - 19:34

When in doubt, ask an internet stranger…

I asked a living, breathing accountant if you can get away with a non-lodgement advice if:
(i) You have no PAYG income,
(ii) You have some Newstart allowance (untaxed),
(iii) you have foreign income (not "exempt foreign income"),
(iv) you have rental income,
(v) you have rental deductions (interest, rates, water, strata),
(vi) you have made no capital losses and are not carrying forward a loss,
(vi) your total income is below the threshold

The accountant says that having a rental property automatically means you need to submit a tax return - regardless of taxable income.

Logically you should submit a tax return since why should a few dollars make a difference to who "reports" their calculations. The counter-argument is you should keep all your documents in case you get audited anyway, and the government only cares about "balancing the books" (the numbers submitted are questionable anyway without flawless data matching).

For the life of me, I can't get the ATO calculator (2012) to ask about rental income or deductions, but maybe my eyes are tired:

https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=DI…

Obviously it's always better to do a tax return to be safe, especially if paying a second set of eyes to look at it. This isn't the question. I only want the facts, personal experience or a funny story, not opinion.

P.S. no guesses please - Whirlpool already has variations on this exact topic (investments, bank interest etc) with mostly wild guesses and life advice.

Financial

Comments

  • toristo on 17/09/2018 - 19:44
    +10

    I went to this girl’s party the week after she beat the shit out of my friend. While everyone was getting trashed, I went around putting tuna inside all the curtain rods and so like weeks went by and they couldn’t figure out why the house smelled like festering death. They caught me through this video where these guys at the party were singing Beyoncé while I was in the background with a can of tuna.

    toristo on 17/09/2018 - 19:44 (Collapsed - Offtopic. Show)
    • peterpeterpumpkin on 17/09/2018 - 19:47
      +1

      Haha. LPT: In my professional opinion, I think canned oysters smell even worse when they fester.

  • chumlee on 17/09/2018 - 20:25

    Maybe just include the rental income into your main income part

    • peterpeterpumpkin on 17/09/2018 - 21:01

      If it wasn't the ATO I would accept it was simply an oversight, but the ATO is normally semantically precise (which is why their "rules" are often uninspiring without concrete examples). The fact they used the phrase "taxable income" (https://www.ato.gov.au/Non-profit/Your-organisation/In-detai…) would be printed with specific intent, as would their definition of carrying on a business (rental properties are considered a form of investment rather than a business).

      While I don't think it's a punishable act to over-provide information, you could imagine how the letter of the law could work against you if you owed them money.

  • Smulder on 17/09/2018 - 20:33
    +1

    Does your rental property make a loss? If so, you need to lodge.

    • peterpeterpumpkin on 17/09/2018 - 21:33

      Ah yes, I see what you mean. I over-interpreted that line to assume that the "loss" would have resulted in a net negative taxable income that could be carried forward (rather than a "net rental property loss").

      So assuming your interpretation is correct, it's only necessary for negatively geared properties.

    • peterpeterpumpkin on 17/09/2018 - 22:37

      Thanks again. I knew OzBargain would pull through. I just had a eureka moment that explains why the ATO use this logic after MrHyde triggered my memory.

      Assuming the accountant is partly wrong, it only gets triggered for net rental investment losses since you must add this loss back when calculating whether you have to pay things like:
      1. the Medicare surcharge levy,
      2. the private health insurance rebate,
      3. the seniors and pensioners tax offset, and
      4. the repayment income for the higher education loan program (the student debt formerly known as HECS) and student financial supplement scheme.

      e.g. as an extreme, completely unrealistic example, as a well-to-do overnight multi-millionaire fresh out of uni, you make $60,000 in untaxed bank interest across several bank accounts (since your TFN was quoted) and your negatively geared property has a net loss of $45,000 (e.g. $20,000 in rent and $65,000 in interest and other deductions), you'll still have to pay HECS on $60,000 even though your taxable income is only $15,000.

    • peterpeterpumpkin on 18/09/2018 - 08:26

      Okay. Based on logical inference, I've found text that contradicts the conclusion that a net rental investment loss must "always" be reported on a tax return, if taxable income is under a certain threshold.

      For 2018 version (https://www.ato.gov.au/Individuals/Tax-return/2018/Before-yo…):

      "You were a liable parent or a recipient parent under a child support assessment unless
      you received one or more Australian Government allowances, pensions or payments for the whole of the period 1 July 2017 to 30 June 2018, and
      the total of all the following payments was less than $24,535:
      taxable income
      exempt Australian Government allowances, pensions and payments
      target foreign income
      reportable fringe benefits total
      net financial investment loss
      net rental property loss, and
      reportable superannuation contributions."

  • MrHyde on 17/09/2018 - 21:33
    -1

    There is a question asking, "Was your taxable income more than $18,200 during the income year?".

    Rental income is taxable income, so it would be counted in that question as is business income, interest, etc.

    Do not count deductions into this question as you specify those separately in the tax return. So, if your foreign income + rental income is more than the threshold, submit a return.

    That's how I read it.

  • hawkeye on 17/09/2018 - 21:40
    -3

    I asked a living, breathing accountant if you can get away with a non-lodgement advice if:

    You have to lodge a tax return each year Period. Even when your dead you still have to finalise for that year.

    What did the simple simon's wankpull pullers advise?

  • [Deactivated] on 18/09/2018 - 01:27

    I'm missing part 1of 2¿

  • kyle on 19/09/2018 - 06:33

    The reason to lodge a return is to get an assessment issued. This will start the clock running so the ATO will only have 2 years to come back and audit. A non lodgement advice does not start the clock.

    • peterpeterpumpkin on 19/09/2018 - 07:46

      Yeah, but I read it's actually extended to 4 years for businesses and rental investments (2 years for basic salary and bank interest). But when I read that law I didn't get how exceptions were made in the case of fraud or "tax evasion". Besides random audits I would assume a "suspicion" is the only reason they would check (e.g. due to data matching)?

      Do you know if a non-lodgement advice can be amended after 2 years, since it's not technically a tax return? My accountant wasn't sure but thought an objection might be possible (which is actually why this question came up).

      • kyle on 19/09/2018 - 22:46

        Having rental investments doesn't automatically put you into the 4 year amendment period. For individuals and small businesses, it's 2 years unless an exception applies http://law.ato.gov.au/atolaw/view.htm?locid=%27PAC/19360027/170(1)%27&PiT=99991231235958#170(1)

        For fraud or tax evasion (i.e. through some deliberate action by the individual to avoid tax), there is no time limit. But the ATO will need to make a case for that.

        What do you mean by amending a non-lodgement advice? You mean lodging a return after two years? Yes you can do that.

        Note that the above advice is general in nature and does not take into account your personal circumstances.

        • peterpeterpumpkin on 20/09/2018 - 07:47

          Hey! Yeah so if I lodged a "non-lodgement advice" 7 years ago I can still turn it into a tax return (which might give a loss etc), even though a tax return from 7 years ago couldn't be amended.

        • kyle on 20/09/2018 - 13:49
          +1

          @peterpeterpumpkin:

          I believe that's correct though I haven't seen such a case.

  • Telcius on 19/09/2018 - 15:41

    I've always been taught you're required to lodge a return if you have a rental property irrespective of whether its a profit/loss or puts your income above/below the tax free threshold. However upon actually having a brief google I am unable to find support for that point of view.

    • peterpeterpumpkin on 20/09/2018 - 08:40

      This is what frustrates me above all else in society, unprovable "facts" due to yesmanship and hero worship.

      It may very well be the case that it is required to lodge in all cases, or in certain unspecified circumstances (perhaps in relation to Centrelink), or at least "recommended" in others, but people aggressively stating things as hard facts without evidence doesn't generate confidence or a better informed society.

      I'm just as guilty of propagating information I've read on the internet as fact because a professional wrote it (which is why I often use the words apparently or that I read it "somewhere").

      But I don't get why non-lodgement is even a thing when a basic calculator could achieve a lodgement and evidence must be kept anyway. I think once a system similar to single touch payroll is extended to all taxable transactions and the Internet of Things allows everything to be tapped in and out of, tax will be a lot simpler. And the future dystopian.

      • Telcius on 21/09/2018 - 13:11

        It's probably a result of previous times where even a very simple tax return was complex and time consuming; thus giving those with simple affairs an easier option. These days doing it online is so quick and easy I don't know why you'd bother with a non-lodgement(assuming you have internet access and computer literacy.

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