As the financial year end approaches, it’s important you are well-aware of the ATO’s key focus areas this financial year. Understanding these key areas means you can stay on the right side of the ATO and minimise the risks of audits or penalties!
3 Key Focus Areas
1. Rental Property Deductions
The ATO has placed a great emphasis on rental property expenses, therefore it is crucial for rental property owners to accurately apportion loan interest expenses when the loan was partially used for private purposes. Landlords should keep detailed records and seek professional advice for correct claiming of their rental deductions.
2. Work-Related Expenses
Working from Home (WFH) deductions have always been an area of focus for the ATO and this financial year is no exclusion. The ‘’Shortcut Method’’ of claiming 80 cents/hour worked from home is no longer available this financial year and taxpayers can instead opt for either ‘’Fixed Rate Method’’ of claiming 67 cents/hour or the ‘’Actual Cost Method’’. Again, maintaining accurate records such as a logbook of days worked from home to substantiate your WFH deductions is essential.
3. Capital Gains Tax
When calculating capital gains tax (CGT), the ATO wants to ensure taxpayers are considering all assets. For example, if you used your home to produce income (e.g renting out all/part of it or operating a home- based business), then you must keep records of the income-producing period and the portion of the property used for income generation purposes. Keeping these records will ensure you are accurately calculating your capitals gains and reporting them in the tax return.
Other important changes to take note of:
- Removal of the Self-Education Expenses Threshold
Prior to 1 July 2022, taxpayers were required to reduce their work-related self-education expenses by $250 to calculate their deductions. The good news is, this non-deductible threshold has been removed starting from 2023 financial year – meaning taxpayers can fully claim their self-education expenses if they can demonstrate a sufficient connection of these expenses with their income-producing activities. These changes also apply to the Fringe Benefits Tax (FBT) year starting 1 April 2023.
- Cryptocurrency Investments
It is mandatory that you report any cryptocurrency transactions in your tax returns regardless of whether they resulted in a gain or a loss. You should keep accurate and detailed records of all transactions (e.g transaction date, transaction nature (buy/sell/swap), the crypto value at the time of transaction and any associated fees. With the ATO improving its data-matching capabilities, it has better access to information from cryptocurrency exchanges and other sources and makes it easier to cross-reference the information included in tax returns with the actual transactions that have occurred.