This tax season, the Australian Taxation Office (ATO) is expected to intensify its focus on two key areas: work-related expenses and claims made by investment property owners. The ATO estimates that there is a $9 billion gap between the amount of tax individuals should be paying and what they are actually paying. The ATO’s random enquiry program has found that this gap is largely due to incorrect deduction claims made for work-related or rental property expenses.
H&R Block director of tax communications, Mark Chapman, advises individuals to be aware of the ATO’s “hotspots” in order to better prepare their tax returns. By understanding which claims they are allowed to make for work-related expenses, individuals can avoid common pitfalls. Work-related expenses are considered the biggest element in the tax gap, according to Chapman.
The ATO is expected to scrutinize work-related expenses, including claims for working from home, mobile phone and internet costs, work-related clothing expenses, and meal claims. The ATO is concerned about incorrect claims and will be on the lookout for evidence of expenses, such as invoices or receipts. Some taxpayers may make errors in these areas, whether intentionally or unintentionally.
Additionally, the ATO will focus on incorrect deduction claims made by investment property owners. They will examine excessive interest expense claims, incorrectly claimed newly purchased rental properties, holiday homes that are not genuinely available for rent, and incorrect apportionment of rental income and expenses between owners. Property owners should only claim deductions for periods when their rental property is rented out or genuinely available to rent. They should also keep records of property-related expenses and proof of rental availability.
The ATO is also closely monitoring cryptocurrency investments. Taxpayers who fail to declare profits gained from cryptocurrency investments may face penalties. Data-matching programs are in place to ensure proper reporting and tax payment for cryptocurrency investors.
Finally, the ATO will check that income and expenses are correctly reported for individuals working in the sharing economy. Sharing economy platforms will be required to provide information on participants, and the ATO will focus on cases such as Airbnb hosts who claim the full main residence exemption while renting out part of their property.
In conclusion, individuals should be confident in their tax claims, keep detailed records, and be aware of the ATO’s focus areas to avoid potential audits or penalties.