Each year, the Australian Taxation Office (ATO) selects particular focus areas for extra scrutiny in the upcoming ‘tax time.’ For 2022, the ATO has announced that the focus will be on:

1. Record-keeping
2. Work-related expenses
3. Rental property income and deductions, and
4. Capital gains from crypto assets, property, and shares.

The Assistant Commissioner Tim Loh said “The ATO is targeting problem areas where we see people making mistakes.”

Below we review some key points to help you ensure these ATO focus areas won’t be a problem for you this tax time.

Lodging in July
People who lodge their tax return in July need to take extra care when lodging their tax return. This is because it can take until the end of July for all their income to be marked as tax ready and so show online in the pre-fill. So it is important to ensure all income is being considered when looking to lodge earlier, not just rely on the pre-fill.

Claiming deductions
You may be able to claim a deduction for work-related expenses such as:

1. Home office expenses such as a computer, related software, stationery, phone and internet expenses
2. Protective clothing, laundry and dry cleaning expenses such as protective gloves or steel capped boots
3. Self education expenses such as trade magazines or seminar or conference fees
4. Work related tools and equipment expenses such as office furniture, hand or power tools, protective equipment or technical instruments
5. Work related vehicle and travel expenses such as car expenses and parking for work related travel, or meals and accommodation when going away overnight for work.

Other expenses you may be able to claim a deduction for include:

1. The cost of managing your tax affairs
2. Any gifts or donations you made to deductible gift recipients
3. Premiums for income protection insurance
4. Expenses incurred in relation to earning interest, dividend or investment income.

For any eligible expenses being claimed, each of the following criteria must be met:

1. You incurred the expense yourself and were not reimbursed for it by your employer
2. Where you incurred an expense that was/is used for both work and private purposes, you only claim the portion that relates to work use
3. You have a record of the expense.

Don’t just rely on the claims you made last year still being relevant. Assess what is actually relevant to the income year when preparing your tax return.

For those that continue to work from home, the ATO is expecting that this would correspond to a “reduction in car, clothing and other work-related expenses such as parking and tolls.”

You may find these articles helpful when considering what deductions you are eligible to claim:

1. What working from home expenses can you claim?
2. Looking to claim a tax deduction for transporting bulky equipment to and from work?

Record-keeping
All documents that relate to the preparation of your tax return must be kept, generally for five years from the date of lodgement of the return. Records can be kept in either a paper or digital format. Where copies are stored, these must be a true and clear copy of the original document. The ATO can ask for copies of records even when they have already issued a notice of assessment.

Documents that you need to keep include:

1. Income statements or payment summaries
2. Bank statements showing interest earnt
3. Dividend statements
4. Summaries from managed investment funds
5. Receipts and/or invoices for equipment or asset purchases and sales, or for expense claims and repairs
6. Depreciation schedules
7. Contracts
8. Tenant and rental records.

Receipts and/or invoices must show the following information:

1. The name of the supplier
2. The amount of the expense
3. The nature of the goods or services
4. The date the expense was paid
5. The date of the document.

The ATO warned that they will be taking firm action to deal with taxpayers who “deliberately try to increase their refund, falsify records or cannot substantiate their claims.”

Rental property income and deductions
If you own a rental property, make sure you include all income you’ve received in relation to your rental in your return. This would include income from any short-term rental arrangements, rental bond money and any insurance payouts received.

All rental income and deductions need to be entered manually on the tax return so it is important to maintain good records.

Capital gains from crypto assets, property and shares
If you have disposed of an asset during the financial year, you will need to work out the capital gain or loss on the asset and report this on your tax return. Generally, this will be the difference between the amount an asset cost you and the amount you received when you disposed of it.

In closing, note that there is a lot of information that the ATO receives and matches, including in relation to rental income, foreign sourced income and capital gains events (involving shares, crypto assets or property) but this does not all necessarily flow through to be pre-filled. So it is important to maintain your own records and not just rely on pre-fill information being available.

If you have any questions regarding the ATO focus areas or would like assistance with preparing your tax return, please call us on 03 5339 3200 or contact us here.

Thanks for reading.

The information contained on this website has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.