What key areas are the ATO targeting this tax time?
The 2022-23 financial year-end is here, and it’s prudent to not only be aware of recent tax changes, but also the priority focus areas, as determined by the Australian Taxation Office (ATO). While we have had a decent run in terms of options available to Australian taxpayers, aka a rather large list of deductions for those eligible from a wide range of industries, the availability of Government grants and programs, plus the Government’s $1,500 tax offset put in place to ease the financial pressure on low and middle income earners, things from July 1 are not going to be the same.
Among other things, the ATO will be targeting three key areas this tax time:
- Record Keeping and Logbooks
- Rental Properties
- Capital Gains from crypto assets, property and shares.
These will not be their only focuses. As in previous years, the ATO will continue to closely review work-related expenses as well as rental property income and deductions.
For the purposes of 2023 year-end, let’s look in a little more detail at the top three focus areas.
The ATO has increased their compliance measures and tax returns will be scrutinised to ensure that taxpayers are providing correct information. The ATO’s data matching programs grow more sophisticated each year. These programs are powerful administrative tools providing the ATO with information from a variety of third-party sources – so picking up inaccurate data and discrepancies has never been easier. When a discrepancy is detected, this triggers a review on the Tax Return. Their data matching programs access Australian bank account statements, Centrelink data, health insurance funds, BAS statements, superannuation accounts and property information that each State in Australia has on file, plus more.
It’s simple. If you don’t have valid supporting documentation for deductions you’re entitled to claim, you can’t claim them.
You must keep valid records for:
- All work-related expenses
- Interest and dividend deductions
- Gifts or donations
- Costs of managing tax affairs
- Sole trader expenses and business income
In particular, the ATO will be cracking down on deductions relating to vehicle travel expenses. It is important to provide an accurate, thorough, ATO approved logbook, which tracks all the travel that you do. To read more about valid logbooks and exactly what information the ATO requires click here.
The ATO has Rental Properties in their sights. One area of particular concern for rental property owners when it comes to tax returns is the treatment of interest deductions. The ATO emphasises the importance of only claiming interest expenses directly associated with the portion of the loan used for purchasing the rental property. It’s important to note that any additional borrowing for personal purposes such as home renovations or vacations, cannot be claimed as interest deductions.
The ATO will also be looking at personal expenses that individuals may inadvertently include in their rental property tax returns. These expenses include repairs, maintenance or purchases related to the property such as those made at Bunnings. To ensure compliance, it’s essential to maintain detailed receipts and only claim deductions that are directly applicable to your rental property.
Lastly, for owners of short-term rental properties (such as those listed on Airbnb or Stayz booking sites), the ATO is paying close attention to ensure that deductions are not claimed for periods when the property was used personally or rented out at a discounted rate to family and friends. To avoid any issues, it’s crucial to maintain accurate records, claim deductions exclusively related to the rental property and adhere to the guidelines set by the ATO.
The ATO has seen a dramatic increase in crypto trading, and it is estimated that there is over 600,000 taxpayers who have invested in crypto assets over the past few years. Many taxpayers believe that their cryptocurrency gains are tax-free or only taxable when the holdings are cashed back into Australian dollars. This is not the case.
Our Accountants Jamie and Cameron are our in-house crypto experts – here’s what they have to say about how the ATO are tracking cryptocurrency gains and how cryptocurrency tax is calculated. Read their article here.
In summary, the ATO means business. In 2023 you can only claim what you’re entitled to – and that means you also must have the valid substantiation documentation for each deduction. For further information from the ATO about this year’s tax focus areas, check out their website here.