WORKING FROM HOME EXPENSES
Last year, more than 8 million taxpayers claimed a work-related deduction with around half of these claiming deductions when working from home. It is not surprising that work-related expenses are firmly in the ATO’s sights.
For individual clients who are working from home, two options are available for claiming deductions on home running expenses. They can either claim deductions based on their actual expenses or adopt the ATO’s revised fixed rate method which uses a rate of 67 cents per hour worked from home.
The revised fixed rate method was only introduced last year, which is why the ATO is reminding taxpayers that certain records still need to be kept while using this method.
For those using the revised fixed rate method, they must keep a record of all the hours they have worked at home during the year (for example, a calendar, diary or spreadsheet) and remember that estimates are no longer sufficient. A record of each relevant running expense (such as an electricity bill) must also be kept.
RENTAL PROPERTIES
For clients earning rental income, rental properties remain a key ATO focus area. The ATO is checking for mistakes being made when claiming deductions for repairs and maintenance versus capital expenditure.
While genuine repairs and maintenance on a rental property can often be claimed as a deduction immediately, the ATO’s warning is that a distinction needs to be made for improvements. Improvements on rental properties could only be claimed normally over time as depreciation deductions or under the capital works rules (rather than as an upfront deduction).
The other warning is that initial repairs to fix problems that existed at the time of purchasing the property (such as repairing a newly purchased property) are also not immediately deductible.
The other common mistakes being reported that the ATO will focus on include:
- overclaimed deductions and lacking documentation to substantiate
- interest deductions include redrawing or refinance used for private expenses
- State or Territory stamp duty being claimed as a deduction.
Please refer to the factsheets Top 10 tips to help rental property owners avoid common tax mistakes and Tax-smart tips for your investment property for more information.
2024 ATO PRE-FILLING REPORT
Lastly, the ATO is recommending taxpayers to not rush to lodge their tax return in early July before pre-fill data is available. This can be especially relevant for clients with multiple sources of income and for example, receive interest from banks, dividend income and payments from other government agencies, as well as those that rely on data from private health insurers.
This is because it is easier to make mistakes when the tax return is not pre-filled. The ATO indicates that most individual taxpayers should have pre-fill data available by the end of July 2024.
The ATO has advised the ATO pre-filling report includes the following changes:
- Interest income and Australian Government allowance and pension data for joint account holders will have a 'certainty indicator. This means that the ATO has high confidence in the data reported to the ATO. Removal and adjustment to the amount in the tax return different to the ATO pre-fill amount will require entering a reason.
- Trade Support Loan is being renamed to Australian Apprenticeship Support Loan (AASL) on 1 January 2024.
TAX DEBT AND NOT MEETING REPORTING OBLIGATIONS
Failing to lodge returns is a huge ‘red flag’ for the ATO that something is wrong in the business. Not lodging a tax return will not stop the debt escalating because the ATO has the power to simply issue an assessment of what they think your business owes. If your business is having trouble meeting its tax or reporting obligations, we can assist by working with the ATO on your behalf.