The Australian Taxation Office (ATO) has three key focus areas for this tax time: rental property deductions, work-related expenses and capital gains tax.
ATO Assistant Commissioner Tim Loh said the ATO is continuing to prioritise areas where we often see mistakes being made.
“Within these areas, we have identified common mistakes, and are particularly focused on addressing these and supporting taxpayers and registered tax agents to get their claims right this year,” he said.
Rental property deductions: landlords – listen up
The ATO’s review of income tax returns show nine in 10 rental property owners are getting their return wrong, and often sees rental income being left out, or mistakes being made with property related deductions – like overclaiming expenses or claiming for improvements to private properties.
Around 87 per cent of individual rental owners use a registered tax agent to prepare their income tax returns.
“We encourage rental property owners and their registered tax agents to take extra care this tax time and review their records before lodging their return,” Mr Loh said.
The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).
“You can only claim interest on a loan used to purchase a rental property to earn rental income – don’t forget, if your loan also includes a private expense, such as for a new car or a trip to Bali, you can only claim an interest deduction for the portion relating to producing your rental income,” Mr Loh said.
The ATO has sophisticated data matching capabilities which include rental property-related data and has recently implemented a new residential investment property loans data matching program.
“This is just one example of the work we are doing to help you get your return right and make sure people are claiming expenses correctly,” Mr Loh said.
For more information visit ato.gov.au/rental
Work-related expenses: avoid the ‘copy-paste’
“We continue to see shifts in the way Aussies are working, and it’s important to consider whether your claims reflect your working arrangements this year,” Mr Loh said.
“There have also been some changes in how you calculate things like working from home deductions, so don’t be tempted to just copy and paste your prior year’s claims. We know a lot of people are working back in the office more compared to last year.”
This year, the ATO is particularly focused on ensuring taxpayers understand the changes to the working from home methods and are able to back up their claims.
To claim your working from home expenses as a deduction, you can use the actual cost, or the revised fixed rate method, so long as you meet the eligibility and record-keeping requirements.
“Keeping good records will give you flexibility to choose the right method that suits your circumstances and gives you the best deduction this tax time,” Mr Loh said.
For more information visit ato.gov.au/home
Capital gains tax: have you considered all assets?
Capital gains tax (CGT) comes into effect when you dispose of assets such as shares, crypto, managed investments or properties. To ensure you are meeting your obligations and paying the right amount of tax, you need to calculate a capital gain or capital loss for each asset you dispose of unless an exemption applies.
“Generally, your main residence is exempt from CGT, however if you have used your home to produce income, such as renting out all or part of it through the sharing economy, for example Airbnb or Stayz, or running a business from home, then CGT may apply,” Mr Loh said.
The ATO is reminding taxpayers of the importance of keeping records of the income-producing period and the portion of the property used to produce income to calculate your capital gain. If you used your property to earn income, and qualify for an exemption, make the election in your tax return.
“Don’t fall into the trap of thinking we won’t notice if you sell an asset for a gain and don’t declare it,” Mr Loh said.
For more information visit ato.gov.au/CGT
Help and support is here
“We know many people are doing it tough this year. We expect fewer people will receive a refund or may receive smaller refunds than they were expecting, and more may have tax debts to manage,” Mr Loh said.
The ATO is committed to supporting taxpayers to meet their obligations and has a range of resources available to help.
“If you’re feeling overwhelmed or getting behind with your tax, let us know as early as possible or have a chat with your registered tax agent so we can work with you to find a solution. Don’t bury your head in the sand,” Mr Loh said.
