Every tax season, the ATO highlights certain hotspots where taxpayers are prone to errors, whether accidental or deliberate. Here’s a rundown of the ATO’s focus areas for 2024 and how you can stay compliant with your individual tax returns.

Work-related Expenses

Work-related expenses are a major focus for the ATO this year. In 2023, over 8 million individuals claimed these deductions, with many related to working from home. Key points include:

  • Revised Fixed Rate Method: In 2023, the ATO updated the fixed rate method for working from home deductions expanding eligible expenses, increasing the rate and adjusting record-keeping requirements. These changes are now fully in use.
  • Record Keeping: Comprehensive records are essential. This includes maintaining diaries or spreadsheets to track hours worked from home and retaining receipts for expenses like electricity and internet bills.
  • Avoid Copy-Pasting Claims: Simply copying last year’s claims can attract ATO scrutiny. Ensure claims reflect your current working arrangements and are backed by proper records.

Golden Rules for Work-related Deductions:

  1. The expense must be personally incurred and not reimbursed.
  2. It must directly relate to earning your income.
  3. A record (usually a receipt) must be available to prove it.

Rental Properties

Rental properties continue to be a significant area of scrutiny. The ATO’s data shows that 9 out of 10 rental property owners make errors in their returns. Points to note include:

  • Immediate vs. Capital Deductions: General repairs like replacing damaged carpet can be immediately deducted while capital improvements (e.g., installing a new kitchen) are deductible over time.
  • Interest Deductions: Ensure you only claim interest on loans used to purchase rental properties. Interest on loans for private purposes, like buying a car, cannot be deducted.
  • Accurate Income Reporting: Report all rental income correctly, including periods when the property was genuinely available for rent.

Cryptocurrency

With the rising popularity of cryptocurrency, the ATO is focusing on ensuring taxpayers declare profits (and losses) from crypto investments. Key points include:

  • Capital Gains Tax (CGT): Profits from selling cryptocurrencies are subject to CGT. Keep detailed records of transactions to calculate gains accurately.
  • Business Income: Regular trading of cryptocurrencies can classify you as a business, subjecting you to different tax rules.

Including All Income

The ATO advises against rushing to lodge your tax return on 1 July 2024. If you receive income from multiple sources, wait until all pre-filled data is available to avoid errors such as omitting interest from banks or dividend income. Most pre-filled data will be ready by late July.

Common Errors to Avoid

  1. Misclassification of Expenses and Income: Ensure all claims and income classifications align with ATO guidelines.
  2. Inadequate Documentation: Maintain meticulous records for all transactions.
  3. Over-claiming Deductions: Avoid exaggerating expense claims, especially in grey areas like home office deductions.
  4. Failure to Report All Income: Include all side gigs or occasional earnings.
  5. Incorrect Application of Tax Laws: Stay updated on recent changes and understand their implications.

Take Action Now

Navigating tax season can be complex but staying informed about the ATO’s focus areas will help you avoid common pitfalls. For personalised advice and to ensure your tax return is accurate, contact our Accounting & Tax team. Our expert team is here to guide you through every step of your financial journey.

Source: ATO flags 3 key focus areas for this tax time