What the ATO might be concentrating on this yr

Once we sit all the way down to do our tax returns post-June, it’s straightforward to let your thoughts wander to the fantastical stuff you probably may declare should you had been daring sufficient, or labored in a distinct profession.

Simply this week, the tax workplace revealed a few of the boldest claims, together with a $30,000 safari journey by a laundromat proprietor, and swimwear bought by a sweaty truck driver who simply needed to go for a dip on the job.

Whereas these two are obviously outrageous, a few of the different claims are a bit extra opaque. I imply, who amongst us hasn’t been tempted to assert an air fryer as a work-from-home deduction? How else am I meant to re-heat my pizza?

However because the ATO likes to emphasize every time our tax returns are due, they’re diligent, and they’re watching. And whereas a few of the tax workplace’s goal areas, similar to work deductions, are apparent,some are much less so.

What’s the issue?

Within the 2021-22 monetary yr, the tax shortfall – the distinction between what the ATO expects to gather from taxpayers and what it truly receives – was $948 million. That is cash that might be spent elsewhere on roads and hospitals and such, so it’s throughout the ATO’s (and the federal government’s) pursuits to cut back the hole. Plus, nobody likes getting a “please clarify” letter from the tax workplace.

What you are able to do about it

So to be sure you’ve received all of your geese in a row this tax time, right here’s what our pleasant tax consultants assume would be the ATO’s focus areas this yr:

• Funding properties/vacation properties: These are a standard fixture on the ATO’s hit checklist, seemingly as a result of 9 in 10 landlords get their tax returns incorrect. Mark Chapman, head of tax communications at H&R Block, says property homeowners can count on the tax workplace to be taking a look at plenty of areas. These embrace extreme curiosity expense claims, similar to the place property homeowners have tried to assert borrowing prices on the household house in addition to their rental property, vacation properties that aren’t genuinely accessible to hire, and incorrect apportionment of rental revenue and bills between homeowners. “The golden rule is; should you can’t substantiate it, you’ll be able to’t declare it,” says Chapman. “So it’s important to maintain invoices, receipts and financial institution statements for all property expenditure, in addition to proof that your property was accessible for hire, similar to rental listings.”
• Rental repairs and enhancements: In an analogous vein, Julia Hartman, tax skilled at BAN TACS, says the ATO might be targeted on rental property homeowners, and if they’re making an attempt to assert deductions instantly as an alternative of depreciating them over plenty of years. She warns that preliminary repairs will not be instantly deductible. “For instance, if the home wanted portray once you purchased it then portray it will be an enchancment so you’ll be able to solely depreciate it at 2.5 per cent, every year,” Hartman says. She additionally warns that repairs will not be deductible if they’re actually enhancements − which in response to the ATO are once you restore the property to a situation that’s higher than once you purchased it. “A restore can change into an enchancment if the restore goes past simply restoring issues to their unique state, for instance changing a steel roof with tiles isn’t a restore,” she says. Hartman notes the road is “removed from clear”, and it is likely to be greatest to get recommendation.
• Bitcoin and different crypto: One other matter the tax workplace has been banging its drum about for some time is crypto. “Rising numbers of taxpayers are leaping on the crypto bandwagon and the ATO believes that a few of them are failing to declare the income (and in some instances the losses) they’re making on their investments,” Chapman says. The ATO will cross-reference knowledge it receives from digital foreign money exchanges, so don’t assume you’ll be capable of get away with it so simply.
• Gig economic system staff: If you happen to drive for Uber or ship for Amazon by way of its Flex program, the ATO is worried you is probably not correctly declaring your income and good points. This additionally applies to individuals who hire our their house by way of Airbnb or Stayz. The tax workplace is now receiving knowledge from these companies, which it could use to match up towards your claims.
• A $300 false impression: Lastly, this can be a widespread one Chapman says he sees each tax time. The ATO permits work-related deductions of $300 to be instantly claimed and not using a receipt. “What we see is individuals claiming $300 with out receipts, assuming it’s a free go,” Chapman says. “It’s not. It’s essential to even have incurred the expense.”