What the ATO are paying attention to this tax season

For many people, lodging their individual tax returns can be stressful. It’s confusing knowing what you can and can’t claim and you definitely don’t want to be called out by the ATO for making any mistakes. Here’s some of the things the ATO are looking at this tax season.

Proof of purchase and record-keeping

While this might seem like a no-brainer, the ATO has advised that you should start organising the income and deductions records that you’ve kept throughout the year. This will make it easier for you and your accountant when the time comes to lodge your tax return and that you are claiming all your entitlements.

Rental property income and deductions

If you’re a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and the rental bond money you’ve retained. ¹ Most rental property owners work with a registered tax agent so that all the information that needs to be entered manually is correct.

Work-related expenses

Since the pandemic, a lot of Australian workers have changed to a hybrid working environment and last year, we saw one in three Australians claiming working from home expenses in their tax return. ¹

To claim work-related expenses, you must have spent the money yourself and weren’t reimbursed, the expense must relate directly to you earning your income and you must have a record to prove it (receipt or invoice). ¹

To claim a deduction for your working from home expenses, there are three methods available:

• Shortcut method (all-inclusive)
• Fixed-rate method
• Actual cost method

The ATO has recommended that you shouldn’t just copy and paste your prior year’s claim. If your expenses were used for both work-related and private use, you can only claim the work-related portion of the expense (for example, you can’t claim 100% of mobile phone expenses if you use that phone to also make private phone calls). ¹

It can be tricky knowing what you can and can’t claim, and there also could be less common expenses that you didn’t know you could claim. Speaking to a tax accountant could ensure that you’re maximising your tax return while staying compliant.

Double-dipping expenses

ATO are reminding business owners and taxpayers not to make the mistake of double-dipping their deductions. Double-dipping refers to claiming the expense twice.

The ATO will be watching these three key areas for double-dipping:

• Shortcut method
  Claiming working-from-home expenses and then double-dipping by claiming additional amounts for expenses such as mobile phone or internet bills, as well as the decline in value of equipment and furniture.
• Work-related car expenses
  Using the cents per kilometre method to make a claim and then double-dipping by claiming expenses separately for fuel, car insurance and registration. Cents per kilometre rate is all-inclusive and covers a decline in value, registration, insurance, maintenance, repairs and fuel costs.
• Expenses you’ve already been reimbursed for
  Claiming expenses that have been reimbursed already by your employer. For example, dry cleaning. ²

Remember the rules for claiming different types of work-related expenses, depending on the type of job, individual circumstances and whether there are substantial records to support the claim.

The ATO use sophisticated data analytics to monitor for incorrect information. So, if you’re found to be deliberately providing incorrect information, you could face an audit and potentially penalties.

Capital gains from crypto assets, property and shares

This type of income is still a relatively new one so it may seem confusing. If you dispose of an asset such as property, shares or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset costs you and what you receive when you dispose of it. You also cannot offset your crypto losses against your salary and wages. ¹

Low and middle income earner tax offsets

Low income tax offset (LITO)

If your taxable income is:

• 37,500 or less, you’ll get the maximum offset of $700.
• Between $37,501 and $45,000, you’ll get $700 minus 5 cents for every $1 above 37,500.
• Between $45,001 and $66,667, you’ll get $325 minus 1.5 cents for every $1 above $45,000. ³

Low and middle income tax offset (LMITO)

The Government announced in the 2022 Federal Budget a one-off $420 ‘cost of living tax offset’ for 2021-22, which effectively increases the maximum offset for LMITO from $1080 to $1500.

If your taxable income is less than $126,000, you will get some or all of the LMITO. The offset amount depends on how much you earn (you need to earn less than $126k to qualify) and you don’t need to do anything to receive it – it’s automatically calculated as part of your tax return. ⁴

Taxable income	Offset
$37,000 or less	$675
From $37,001 to $48,000	$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500.
From $48,001 to $90,000	$1,500
From $90,001 to $126,000*	$1,500 minus 3 cents for every dollar above $90,000.

Note: If your taxable income is $126,000 or more, you will not receive the LMITO.

Source: ATO

Lodging your tax return

We find that a lot of people rush to lodge their tax return on the first day of the new financial year but doing that can actually slow down your tax refund. Your employer has until 31 July to provide the ATO with your super contributions, year-to-date (YTD) salary and PAYG details. If you wait until after your details have been pre-filled, this will make the tax return process smoother, save you time and ensures your tax return is lodged right.

If you’re lodging on your own, when you log into your myGOV account, your statement will be marked as ‘tax-ready’ once this information has been received. ⁶

The ATO may issue you a ‘Failure to Lodge’ (FTL) penalty if your tax return isn’t lodged by the due date. The fine is calculated at the rate of one penalty unit for each period of 28 days or part thereof that the document is overdue, up to a maximum of five penalty units. ⁵

So, if you can’t lodge by the due date, make sure you contact the ATO as soon as possible to try and reduce the risk of a penalty.

Maximise your tax return with a tax agent

Recording your income and claiming your work-related expenses may seem like a simple task, yet many of us make the honest mistake of claiming deductions that we shouldn’t be and missing out on others.

By working with a tax agent, you’re ensuring that your tax return is lodged correctly, making tax time as stress-free as possible.

As this is the busiest time of year for our tax accountants, book in your appointments from the end of July as soon as possible.

SOURCES

¹ Four priorities for the ATO this tax time

² ATO warns on “double-dipping” of tax deductions

³ Low-income tax offset

⁴ Low and middle-income tax offset

⁵ Failure to lodge on time penalty

⁶ When to file your tax return