ATO focus areas this tax season
The Australian Taxation Office EOFY Focus Areas.
The Australian Taxation Office have released their three key areas of focus ahead of the upcoming tax season.
Incorrectly claiming work-related expenses
Inflating claims for rental properties
Failing to include all income when lodging
As stated by the ATO Assistant Commissioner, Rob Thomson “These are the areas that people are most likely to get wrong, and while these mistakes are often genuine, sometimes they are deliberate. Take the time to get your return right”.
These focus areas are not however new and have been a topic of interest over the past years.
Work-related expenses
Over 8 million people claimed a work-related deduction in 2023, with near half of those claims being related to a working from home deduction.
In 2023 the ATO made revisions to the fixed rate method of calculating a working from home deduction to broaden what is included, increase the rate, and adjust the records you need to keep. Having now been in effect for a financial year, you must have comprehensive records to support your claims when lodging your tax return.
Your records must indicate the actual amount of hours you worked from home (can be in the form of a calendar, diary or spreadsheet), and the additional running costs you incurred to claim a deduction (for example an electricity or internet bill).
ATO Assistant Commissioner, Rob Thomson said ‘Deductions for working from home expenses can be calculated using the actual cost or the fixed rate method, and keeping good records gives you the flexibility to use the method that works for you, and claim the expenses you are entitled to.’
‘Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records’.
The three golden rules to claiming a working from home related deduction
You must have spent the money yourself and weren’t reimbursed
The expense must directly relate to earning your income
You must have a record (ie receipt) to prove it
Rental properties
With records showing that 9 out of 10 rental property owners getting their income tax returns wrong, rental properties remain a strong focus of the ATO.
Mr Thomson stated, ‘we often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this’.
‘This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit’.
It’s important to distinguish the difference between eligible deductions.
General repairs and maintenance on a rental property can be claimed as an immediate deduction, however, expenses which are capital like in nature are not deductible as repairs or maintenance. Such ineligible expenses may include repairs on a newly purchased property and repairs made during the time you hold the property.
Wait to lodge and get it right the first time
The ATO is advising against rushing to complete your tax return on July 1.
It is always best to wait until all pre-filled information is required before attempting to lodge your return - especially if you are receiving income from multiple sources. By waiting, your tax return process will be smoother, save you time and help you get your tax done correctly the first time.
‘We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,’ said Mr Thomson.
The ATO suggests waiting a couple of weeks into the new financial year to lodge your tax.
If you need support with lodging your tax return we encourage you to reach out to one of our experienced Accountants who will be available for appointments after Monday 15 July.
We are here to help
If you need further advice on this topic, please do not hesitate to contact our office on (03) 5445 4777 and one of our Accountants will be available to support you.
