When it comes to lodging tax returns, most people are trying to do right thing and report their income correctly. However, sometimes people make inadvertent mistakes, either as a result of misunderstanding or because they simply forget about certain sources of income.

Common types of income that are often get misreported or overlooked include the following:

Cryptocurrency Gains

Transactions involving cryptocurrency have tax consequences. Earlier this year, the ATO announced crackdown on undeclared cryptocurrency gains and warned they will be writing to around 100,000 taxpayers urging them to review their prior year tax return.

Despite the anonymous nature of crypto transaction, the ATO has the ability to track transaction from banks, financial institutions and cryptocurrency exchanges and is using their data-matching techniques to trace these transactions back to the individuals.

If you were involved in acquiring, disposing, exchanging or mining cryptocurrencies, do not forget that you need report your cryptocurrency gains and income in your tax return. The tax treatment will depend on the nature of your activities.

Don’t forget to report any capital losses you made on cryptocurrency. The losses can be offset against current year capital gains or carried forward to future years.

Keep in mind that losses made on trading account may not be deductible against your other assessable income and may have to be quarantined under the Non-Commercial Losses provisions.

Scholarships

If your scholarship payments are not exempt income, they must be included in your tax return.

The scholarship payment is exempt from tax if:

 – it is made to or on behalf of a full-time student at a school, college or university

 – the scholarship is not provided principally for educational purposes

To be exempt, he amount cannot:

 – be an excluded government payment (Austudy, Youth Allowance or ABSTUDY);

 – be made on a condition that the student will be required to enter into, or be a party to, a contract for labour.

To help you work out if your scholarship is taxable or tax exempt, use the ATO interactive tool “Is my scholarship taxable?”

Personal Services Income

If you are generating income mainly by providing personal services, that income must be assessed to you personally even if you are trading through another entity (company or trust). If the income is caught under PSI Rules (Part 2-42 of Income Tax Assessment Act 1997), it must be passed to the individual by way of attribution (unless paid out as a salary). Expenses relating to individual’s PSI are also attributed to the individual.

If the personal services income generated by a practitioner from provision of professional services is not within the scope of PSI Rules (i.e. if one of the PSB tests are passed), it is still subject to anti avoidance measures preventing income alienation. Such income must be paid out to the individual who provided the services.

Assessable Industry and Government Payments

If you received any Government industry incentive payments, such as Practice Incentives Program (PIP) and Workforce Incentive Program (WIP) payments, don’t forget to include them in your assessable income. Some incentive payments are made to a practice entity, while others are paid to individual medical practitioners.

If you received JobKeeper payments in the current year, do not forget that these payments are taxable and must be included in the entity’s assessable business income.

In contrast, Cash Flow Boost payments are Non-Assessable Non-Exempt (NANE) income.

Be wary that some payments made by local governments to support small businesses impacted by Covid-19 are specifically exempt from tax (treated as NANE Income), while others will have to be included in taxable income. If you are unsure about tax treatment of government payments you received, speak to your accountant.

Capital Gains

Most people know that disposal of real estate property, shares, units or other property is subject to Capital Gains Tax. But did you know that disposal of capital asset is not the only event that triggers CGT consequences?

The common situations where CGT may be triggered include the following:

 – Disposing of personal use assets costing over $10,000

 – Transferring property for no consideration

 – Receiving capital payment for shares or interest in a trust

 – Granting , extending , renewing or varying a lease

 – Receiving insurance compensation for a capital asset

 – Individual, trust or company stops being an Australian resident

 – Failing to acquire a replacement asset after a rollover

 – Converting a capital asset to an item of trading stock

 – Issuing shares or trust interest for no consideration or at a discount

The list is not exhaustive. Altogether, there are 54 CGT Events currently listed in tax legislation. If you are in doubt, discuss your circumstances with your accountant.

Remember, if a CGT event results in capital loss or if it is eligible for an exemption or rollover, you still need to include the information in your tax return.

Be careful when classifying lump sums payments, such as compensation payments, insurance payouts or payments made under a contract, as capital gains. Whether these payments are capital, ordinary income or non-taxable income, depends on the facts.

See also: Capital vs Revenue: Update on Healius case 2020

Identifying correct tax treatment for some types of income is not always straightforward and requires professional judgment of a qualified tax professional.

Not sure what income you need to declare as a medical professional? Get in touch with us to speak to a Medical Accounting Specialist.

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