The ATO is warning taxpayers to be vigilant on a range of claims that will come in for greater attention during tax time this year, from work-related expenses to cryptocurrency gains.

Assistant commissioner Tim Loh said the ATO was targeting problem areas where it saw people making mistakes.

“It’s important you rethink your claims and ensure you can satisfy the three golden rules,” Mr Loh said.

“First, you must have spent the money yourself and weren’t reimbursed. Second, if the expense is for a mix of income-producing and private use, you can only claim the portion that relates to producing income. Finally you must have a record to prove it.”

Mr Loh said the ATO was placing a strong focus on good record-keeping, urging taxpayers to organise early.

“We know there are still some weeks left until tax time, but if you start organising the income and deductions records you’ve kept throughout the year, this will guarantee you a smoother tax time and ensure you claim the deductions you are entitled to,” Mr Loh said.

“For those people who deliberately try to increase their refund, falsify records or cannot substantiate their claims the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.”

Mr Loh said the ATO often saw lots of mistakes in July as people rushed to lodge their tax returns and forgot to include interest from banks, dividend income, payments from other government agencies and private health insurers. 

For most people, this information would be automatically pre-filled in their tax return by the end of July. 

“This will make the tax return process smoother, save you time, and get your tax return right. If you want to lodge earlier, you must take extra time to manually add all your income,” Mr Loh said.

“You can check if your employer has marked your income statement as ‘tax ready’, as well as if your pre-fill is available in myTax before you lodge.

“That way, an amendment doesn’t need to be made later, which could result in delays to your refund.”

Mr Loh said available pre-fill information and readiness to lodge could be easily checked in the ATO app.

“While we receive and match a lot of information on rental income, foreign-sourced income and capital gains events involving shares, crypto assets or property, we don’t pre-fill all of that information for you,” he said.

Work-related expenses

The ATO said it had seen a big shift in work-related expenses as one in three Aussies had claimed working-from-home expenses in their tax return last year. 

Mr Loh said the ATO was expecting taxpayers to make reasonable claims for both home office and travel expenses.

“Some people have changed to a hybrid working environment since the start of the pandemic. If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls,” Mr Loh said.

Mr Loh said to claim a deduction for working-from-home expenses three methods were available depending on circumstances. These were the shortcut (all-inclusive), fixed-rate and actual cost methods.

“Each individual’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims,” he said.

“If your expense was 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 per cent of mobile phone expenses if you use your mobile phone to ring mum and dad.”

H&R Block head of tax communications Mark Chapman said the ATO had chosen to focus particularly on working-from-home deductions this year.

“With millions of Australians having worked from home for some or all of the last tax year, this will inevitably be a source of stress for Australians as they try to get their heads around the three methods of claiming – actual expenses, the 52 cents method and the 80 cents method,” he said.

“In particular, taxpayers will need to be aware of the wide disparity between what can be claimed under the three methods and also the record-keeping burden that they impose. 

“Whilst the ATO’s shortcut method has the lightest burden for record-keeping, it usually produces by far the lowest tax deduction.”

Rental income and deductions

Rental income and deductions had also become a focus point this year with the ATO warning rental property owners to include all the income received from rental in the tax return, including short-term rental arrangements, insurance payouts and rental bond money retained.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs,” Mr Loh said.

“I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance. 

“If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. 

“We can also ask for supporting documentation for any claim that you make after your notice of assessment issues.”

Mr Chapman said the focus on investment property owners was likely to be particularly pronounced because rental losses were likely to be bigger than normal this year due to the COVID crisis.

He said the key tip was to ensure that property owners kept good records.

“If you can’t substantiate it, you can’t claim it, so it’s essential to keep invoices, receipts and bank statements for all property expenditure, as well as proof that your property was available for rent such as rental listings,” Mr Chapman said.

Capital gains from crypto 

The Tax Office said it would also be placing a strong focus on cryptocurrency gains this tax time.

Mr Loh said if taxpayers had disposed of an asset such as property, shares or a crypto asset including NFTs this financial year, they would need to calculate a capital gain or capital loss and record it in the tax return.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year,” Mr Loh said.

“Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

“Remember you can’t offset your crypto losses against your salary and wages.

“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it’s important people understand what this means for their tax obligations.” 

Mr Chapman said the ATO was collecting bulk records from Australian cryptocurrency designated service providers as part of a data-matching program to ensure people trading in cryptocurrency are paying the right amount of tax. 

“Data to be provided to the ATO will include cryptocurrency purchase and sale information,” he said. “The data will identify taxpayers who fail to disclose their income details correctly.”

Tony Zhang

27 May 2022

accountantsdaily.com.au