The Australian Taxation Office (ATO) has announced the three target areas they will be taking a close look at this tax time! We break down what each of these mean, and how you can get prepared so you can maximise your return.
Each year the ATO releases a few items that their accountants will be looking at in all individual tax returns. This can be based on issues they have seen in past years.
In 2023-24 the ATO will be focusing on work-related expenses, rental properties and that you are declaring all income on your tax return.
If you’re gearing up to lodge your tax return, it is particularly important you are compliant in these areas, as they will be under extra scrutiny this year.
Work-related expenses
With the rise in people working from home over the past few years, work-related expenses remains a hot topic for the ATO.
Last year the ATO made changes to the fixed rate method of calculating a working from home deduction. Tax payers are being reminded that they must have comprehensive records to substantiate their claims, including records that show the actual number of hours they worked from home, and the additional running costs they incurred to claim a deduction.
We have created a Home Office Diary that you can use to record the number of hours worked. This diary must be filled out for every job (or client) that you work from home. We suggest filling this diary out each week so that you can accurately track your hours.
You can use this diary as part of your record keeping for home expenses, along with any other running costs incurred.
Rental properties
The ATO continues to scrutinise deductions recorded for rental properties. According to past data from the ATO, nine out of 10 investment property owners are making mistakes on their returns! Investors are urged to be clear on what they can claim for their property.
Amongst the most common mistakes made, are property investors not understanding what initial repairs they can claim when they purchase a property that may have some existing damage.
Performing general repairs and maintenance on a rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (such as initial repairs on a newly purchased property) are not deductible as repairs or maintenance. You may be able to claim a deduction over several years as a capital works deduction. These costs are also used to work out your capital gain or capital loss when you sell the property.
The ATO has compiled a list of their top tips to avoid common mistakes when claiming a rental property at tax time.
Failing to include all income in a tax return
With many people having multiple sources of income, the ATO warns taxpayers against rushing to lodge their tax return on 1 July.
The rise of the share economy means people may have other sources of income that could go undetected. This includes:
- Ride-sharing and delivery services: Income from ride-sharing, food delivery, or other gig economy jobs need to be reported. This also includes tips and bonuses earned during your shifts.
- Online freelancing: Any income from online freelancing platforms must be declared, including both domestic and international sources.
- Rental income: Income from short-term rental platforms must be declared, such as AirBNB or renting your room while on holidays. Any related fees and charges must be declared, including rent charged.
These sources of income must be included in your tax return, along with any jobs worked for an employer. If you have received income from multiple jobs, you need to wait until this is prefilled in their tax return before lodging.
If any of these target areas apply to you, please reach out to see how we can assist with your tax return. Contact us on 6144 3370 or email office@ultimate-tax.com.au
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