The Australian Taxation Office (ATO) has announced there are 3 key focus areas for this Tax Time:
- rental property deductions
- work-related expenses
- capital gains tax.
The ATO is continuing to prioritise areas where we often see mistakes being made and focussing on addressing and supporting taxpayers and registered tax agents to get their claims right this year.
Rental property deductions:
The ATO’s review of income tax returns show 9 in 10 rental property owners are getting their return wrong, and often sees rental income being left out, or mistakes being made with property related deductions – like overclaiming expenses or claiming for improvements to private properties.
Around 87% of individual rental owners use a registered tax agent to prepare their income tax returns.
The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).
You can only claim interest on a loan used to purchase a rental property to earn rental income – don’t forget, if your loan also includes a private expense, such as for a new car or a trip to Bali, you can only claim an interest deduction for the portion relating to producing your rental income.
‘This is just one example of the work we are doing to help you get your return right and make sure people are claiming expenses correctly,’ Mr Loh said.
With the continuous shift in the way Aussies are working, it’s important to consider whether your claims reflect your working arrangements this year.
There have also been some changes in how you calculate things like working from home deductions, so don’t be tempted to just copy and paste your prior year’s claims.
This year, the ATO is particularly focused on ensuring taxpayers understand the changes to the working from home method and are able to back up their claims.
To claim your working from home expenses as a deduction, you can use the actual cost, or the revised fixed rate method, so long as you meet the eligibility and record-keeping requirements.
‘Keeping good records will give you flexibility to choose the right method that suits your circumstances and gives you the best deduction this tax time,’ Mr Loh said.
Capital gains tax:
Capital gains tax (CGT) comes into effect when you dispose of assets such as shares, crypto, managed investments or properties. To ensure you are meeting your obligations and paying the right amount of tax, you need to calculate a capital gain or capital loss for each asset you dispose of unless an exemption applies.
The ATO is reminding taxpayers of the importance of keeping records of the income-producing period and the portion of the property used to produce income to calculate your capital gain. If you used your property to earn income, and qualify for an exemption, make the election in your tax return.
For further information our team is here to help you! Contact Piteo Accounting and Advisory team on 08 7228 6111 or piteoaccounting.com.au/contact-us/