ATO to Scrutinise Work-related Expenses, Rental Properties and Rushed Lodgments

Tax time is fast approaching and the ATO has issued a warning that they will be focusing on three major problem areas this year:

    • Incorrectly claiming work-related expenses;
    • Inflating claims for rental properties; and,
    • Failure to include all income when lodging.

Are you still working from home?

Many people continue to work from home after COVID-19 but fail to keep comprehensive records to substantiate their claims.

It can’t be a simple cut and paste job from last year’s tax return either because if you do, a further ‘please explain’ from the ATO will be headed your way.

To avoid a reprimand, keep in mind these three principal rules for successfully claiming a deduction for any work-related expense:

    1. You must have spent the money yourself and weren’t reimbursed;
    2. The expense must directly relate to earning your income; and,
    3. You must have a record (usually a receipt) to prove it.

If you need further clarification, please contact TAG ahead of time, so we can check that you have all the supporting material you need to claim successfully.

Do you own a rental property?

The ATO has also reported that last year, nine out of ten rental property owners had errors in their income tax returns. Many property repairs and maintenance deductions were incorrectly recorded, which has now led to tougher reviews this year.

You can claim an immediate deduction if you’re performing general repairs and maintenance on your rental property. However, keep in mind that expenses which are capital in nature (like initial repairs on a newly purchased property and any improvements during the time you hold the property) are not deductible as repairs or maintenance.

We can assist you with preparing your tax returns correctly for your rental properties. However, ensuring you have kept full and complete records of general maintenance costs is half the battle.

And remember, don’t rush your lodgment!

Some people are quick to lodge their tax returns on 1 July but the ATO has given a ‘heads up’ that it’s a good idea to wait a little longer. This is especially relevant to individuals who receive their income from multiple sources.

Common errors are usually when people forget to include interest from their banks, dividend income, payments from other government agencies and private health insurers.

So, as tempting as it is to lodge your return as early as possible and get it out of the way, waiting a few extra weeks is best to avoid it being flagged by the ATO.

We are here to help.

It’s a very important (and sometimes stressful!) time of year for many. However, you are not alone. Please contact us if you have any questions or need further advice in preparation of your tax return this year.

What should you do now?

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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2024. Please do not reproduce without the expressed written consent of the author.