Every tax season, the Australian Taxation Office (ATO) zeroes in on specific areas where taxpayers are prone to making mistakes, either accidentally or intentionally. For 2024, the ATO’s primary focus areas include:
- Record-Keeping
- Work-Related Expenses
- Rental Property Income and Deductions
- Sharing Economy Income
- Capital Gains from Crypto Assets, Property, and Shares
Let’s delve into each of these areas to understand why the ATO is paying special attention to them this year.
Work-Related Expenses
The ATO recently identified an $8.7 billion shortfall between the tax individuals are expected to pay and the tax they are paying, with work-related expenses being the largest contributor to this “tax gap.” In 2024, expect the ATO to scrutinize the following:
- Working from Home Expenses: The introduction of a new 67 cents per hour fixed rate and enhanced substantiation requirements means the ATO will verify records of all working hours over the entire tax year.
- Occupation Costs: Deductions for rent, rates, and mortgage interest are not allowable unless you’re running a business from home.
- Mobile Phone and Internet Costs: Claims for the entire or substantial part of the bill for personal mobile use will be closely examined. The ATO will also check for “double dipping,” where taxpayers claim both the 67 cents per hour working from home rate and their mobile costs separately.
- Work-Related Clothing, Dry Cleaning, and Laundry Expenses
- Overtime Meal Claims
- Union Fees and Subscriptions
- Motor Vehicle Claims: Particularly those using the 85 cent per kilometre flat rate for journeys up to 5,000kms.
- Invalid Expenses: Many taxpayers claim the $300 receipt-free threshold without incurring any expense at all.
BOA & Co.’s Top Tip #1: Before making a claim, ensure you understand what you can and can’t claim, have the necessary expenditure proof (invoices, receipts, diaries), and can prove it was work or business-related.
Property Spotlight
The ATO has announced that in recent audits, errors were found in 90% of reviewed returns for investment property and holiday home deductions. This year, they will focus on:
- Excessive Interest Expense Claims: Such as claiming borrowing costs on both the family home and rental property.
- Incorrect Apportionment of Rental Income and Expenses: Ensuring that deductions on jointly owned properties are properly split.
- Holiday Homes: Only claim periods the property is rented out or marketed for rent. Periods of personal use cannot be claimed.
- Incorrect Claims for Newly Purchased Rental Properties: Repair costs at the time of purchase or renovation costs cannot be claimed immediately but are deductible over several years.
BOA & Co.’s Top Tip #2: “If you can’t substantiate it, you can’t claim it.” Ensure clear records of all property expenditures and proof that your property was available for rent.
Sharing Economy
The ATO believes many people in the sharing economy are not declaring their profits and gains properly. This includes income from Uber, Airtasker, Airbnb, and Stayz. The ATO now receives reports from many platforms to highlight data mismatches.
Cryptocurrency
With the booming cryptocurrency market, the ATO is focusing on investments in crypto assets. They believe some taxpayers are not declaring their profits or losses. Remember, investing in cryptocurrencies can attract capital gains tax (CGT) on profits, and traders can be taxed on their profits as business income. The ATO collects data from cryptocurrency designated service providers to ensure proper tax reporting.
Shares
When disposing of shares, investors (not traders) must pay CGT on any profits. This applies not just to sales but also to giving shares away or ceasing to be an Australian resident. The ATO is focused on ensuring accurate reporting and correct characterization of share income, distinguishing between investors and share traders.
BOA & Co.’s Top Tip #3: Ensure you have all necessary information about your share sales, including the original purchase cost, sales proceeds, acquisition and sale dates, and any associated costs (e.g., brokerage fees).
Ensure your tax returns are accurate and compliant. Contact BOA & Co. Financial Group for expert tax advice and services. Call us at 1300 952 286, email us at info@boanco.com.au, or visit our website at www.boanco.com.au.