Melbourne Lilydale Dandenong

ATO’s three key focus areas for this Tax Time 2023

The Australian Taxation Office (ATO) has today announced its 3 key focus areas for this Tax Time:

  • rental property deductions
  • work-related expenses
  • capital gains tax.

According to ATO, their main focus is on prioritizing areas where mistakes are commonly made. They have identified these specific areas and are dedicated to addressing these issues. The ATO is committed to supporting taxpayers and registered tax agents in ensuring that their claims are accurate this year.

Rental property deductions: landlords

The Australian Taxation Office (ATO) has found that the majority of rental property owners, approximately 9 out of 10, are making errors in their income tax returns. Common mistakes include failing to include rental income and making errors in property-related deductions, such as overclaiming expenses or claiming improvements on personal properties. It is worth noting that around 87% of individual rental owners rely on registered tax agents to prepare their tax returns.

In light of these findings, Tim Loh, the Assistant Commissioner at the ATO, urges rental property owners and their tax agents to exercise extra caution during this tax season. He advises them to thoroughly review their records before lodging their returns. The ATO is particularly focused on interest expenses and ensuring that rental property owners understand how to correctly allocate loan interest expenses when a portion of the loan was used for personal purposes or refinancing.

Loh emphasizes that interest deductions can only be claimed for loans used specifically to purchase a rental property and generate rental income. If the loan also covers personal expenses, such as a new car or a vacation, only the portion directly related to rental income can be claimed as an interest deduction.

To assist taxpayers in getting their returns right and ensuring accurate expense claims, the ATO utilizes advanced data matching capabilities that include rental property-related data. They have recently introduced a new program specifically targeting data matching for residential investment property loans.

For more information visit ATO rental property deductions guide.

Work-related expenses: avoid the ‘copy-paste’

‘As we witness ongoing shifts in the way Australians work, it is crucial to evaluate whether your tax claims accurately reflect your working arrangements this year. It’s worth noting that there have been changes in calculating deductions for working from home, so it’s essential not to simply copy and paste your previous year’s claims. It’s important to be aware that many individuals are returning to working in the office more frequently compared to last year.

This tax year, the Australian Taxation Office (ATO) places particular emphasis on ensuring taxpayers comprehend the modifications to the methods used for calculating working from home deductions and can substantiate their claims effectively. To claim deductions for working from home expenses, you have the option to utilize the actual cost method or the revised fixed rate method, provided you meet the eligibility criteria and maintain proper record-keeping.

Maintaining accurate records will provide you with the flexibility to select the most suitable method that aligns with your specific circumstances and ensures the maximum deduction for this tax season. It is crucial to stay informed about these changes and make informed decisions to optimize your tax return

Capital gains tax: have you considered all assets?

When it comes to disposing of assets such as shares, cryptocurrencies, managed investments, or properties, it’s important to be aware of the capital gains tax (CGT) implications. Calculating a capital gain or capital loss for each asset you sell, unless an exemption applies, is essential for meeting your tax obligations and ensuring accurate tax payments.

While your main residence is generally exempt from CGT, it’s crucial to note that if you have utilized your home to generate income, such as through renting out part or all of it via platforms like Airbnb or Stayz, or conducting a business from your home, CGT may be applicable. It’s crucial not to fall into the misconception that the ATO won’t notice if you sell an asset for a gain and fail to declare it. Compliance is key, and the ATO actively monitors and enforces CGT obligations. Ensuring you report all relevant gains or losses will help you stay on the right side of the law and avoid any penalties or consequences.

Remember, understanding CGT rules and keeping accurate records are essential steps in managing your tax liabilities and meeting your obligations. If you have any doubts or questions about CGT and its impact on your specific situation, consulting with a tax professional or referring to official ATO guidance can provide valuable guidance.

Learn more from ATO’S CGT guides.

Help and support is here

With TASC Accountants and Business Advisors by your side, you can have peace of mind knowing that your tax file is in capable hands. We stay up-to-date with the latest changes in tax laws and regulations, ensuring that your submissions are accurate and in line with all necessary compliances.