Tax Time 2013

The following summarises some of the key messages from the ATO’s meeting with the professional associations at the ATO Tax Practitioner Forum (ATPF) on 26 June 2013.

Client lists and new clients: The ATO recommends that agents undertake regular reviews of their client lists to add any new clients for the year and to remove those clients they no longer represent. Also, tax agents should “maintain their vigilance” when checking new and existing client’s identity, and especially to remind new clients to bring their identification to an appointment, including their bank account or financial institution details, as well as photo identification.

Important Tax Time 2013 changes: There have been a number of significant changes to tax products, tax return forms, instruction guides and requirements for Tax Time 2013.

Spouse information and need to complete income tests labels: This year, the private health insurance rebate, the Medicare levy surcharge and net medical expenses tax offset are all subject to income testing. Tax agents should ensure that they review the income and spouse details sections this year, to ensure that their clients receive their correct entitlement.

Net medical expense offset: The government will phase out the net medical expenses tax offset (NMETO), with transitional arrangements for those currently claiming the offset:

• n from 1 July 2013, those taxpayers who claimed the NMETO for the 2012/13 income year will continue to be eligible for the NMETO for the 2013/14 income year if they have eligible out of pocket medical expenses above the relevant thresholds;
• n similarly, those who claim the NMETO in 2013/14 will continue to be eligible for the NMETO in 2014/15.

The offset will continue to be available for taxpayers for out-of-pocket medical expenses relating to disability aids, attendant care or aged care until 1 July 2019.

Carry back losses: Law has now passed through Parliament to allow corporate tax entities to carry back tax losses so they can claim a refund against tax previously paid. A one-year loss carry back will apply in 2012/13, where tax losses incurred in that year can be carried back and offset against tax paid in 2011/12. For 2013/14 and later years, tax losses can be carried back and offset against tax paid up to two years earlier. Loss carry back is:

• available to companies (and entities taxed like companies) which elect to carry back losses; and
• applied to revenue losses incurred but not transferred.

The loss carry back tax offset is the lessor of:

• $1 million x the corporate tax rate (i.e., $1 million x 30%, or $300,000);
• the sum of the loss carry back tax components for the middle year and the earliest year (i.e., the actual tax paid in the relevant years that is being claimed back); and
• the company’s franking account balance.

Labels to claim the loss carry back tax offset can be found on the Company tax return 2013 (NAT 0656-6.2013) and the Losses schedule 2013 (NAT 3425-6.2013). If the company’s return has already been lodged, it could be amended in order to claim the loss carry back tax offset, assuming the taxpayer meets the relevant requirements (and interest on overpayment will be paid where applicable).