2024 Tax Time: Compliance Hotspots

2024 Tax Time: Compliance Hotspots

Tax time can be stressful, but it doesn’t have to be!

Each year, the ATO focuses on certain areas where mistakes are commonly made. By understanding these areas, you can avoid any unnecessary hassle and ensure you’re paying the right amount of tax.

1. Record-Keeping

The ATO emphasizes the importance of good record-keeping throughout the year. This will make the process much smoother come tax time and save you from potential headaches down the road.

MyDeductions is a free record-keeping tool in the ATO app that makes it easier to keep all your records in one place. 

2. Work-related expenses

The ATO believes that work-related expenses claims are the biggest element in their $8.7 billion “tax gap”, the shortfall between the tax individuals are expected to pay and the tax they are actually paying.

Some focus areas include:

  • The way to claim deductions for work-from-home expenses has changed. With the introduction of a new 67 cents per hour fixed rate and enhanced substantiation requirements, make sure to keep a record of all your working hours over the tax years i.e. timesheets, diary, or work rosters.
  • “Occupation” costs (rent, rates, mortgage interest) for working from home are not deductible unless you’re running a business from home.
  • Do not “double-dip” your deductions i.e. claiming the 67 cents per hour working from home rate – which includes an element for mobile phone costs – in addition to claiming mobile costs separately.
  • Beware of claiming the whole (or a substantial part) of your mobile phone and internet costs as work-related as the ATO might tag this as suspicious. 
  • Automatically claiming the 5,000km limit for motor vehicle deductions raises a red flag for the ATO. They suspect many taxpayers are using this flat rate without considering their actual kilometres driven.
  • Making expense claims without receipts, even if under $300 in total. The ATO believes that some taxpayers are claiming this – or an amount just less than $300 – without actually incurring the expenses at all.
  • Other ATO focus areas: Claims for work clothes, dry cleaning, laundry, overtime meals, union fees.

Before making any claims, understand what can and can’t be claimed and gather the necessary proofs (i.e. receipts, invoices, and bank statements) for everything you claim as a deduction. This will make the process much smoother come tax time and save you from potential headaches down the road.

2. Rental Properties

Whether you’re a seasoned investor or a weekend warrior renting out your holiday home, keep an eye out for:

  • Claiming interest expenses twice i.e. Claiming borrowing costs on both your home and rental property.
  • Split rental property deductions according to your ownership stake in the property. Not by who has the higher income. 
  • The rental property can only be claimed for periods where it is rented out or genuinely available for rent. Period of personal use cannot be claimed. 
  • Repairs for existing damage and renovation costs on a new rental property can’t be deducted immediately. Instead, you should spread these deductions out over a number of years.

The golden rule is: if you can’t substantiate it, you can’t claim it. Be sure to keep invoices, receipts and bank statements for all property expenditures, as well as proof that your property was available for rent, such as rental listings.

4. Sharing economy

While the sharing economy offers a variety of ways to make money, the ATO wants to ensure everyone’s playing by the rules. If you use platforms like Uber, Airtasker, Airbnb, or Stayz, be aware that the ATO has new procedures to identify people who might not be reporting their income correctly.

  • The ATO is now receiving reports from many platforms (including Uber), which it can use to highlight data mismatches. 
  • The ATO has numerous third-party sources of data which it can use to identify if you are receiving rent and they are on the look-out for mismatches with the tax return data that you report.

5. Cryptocurrency

The cryptocurrency market is booming, and the ATO wants to make sure that everyone is paying their fair share. Remember, investing in cryptocurrencies can give rise to capital gains tax (CGT) on profits. Traders can be taxed on their profits as business income.

The ATO is collecting bulk records from Australian cryptocurrency designated service providers (DSPs) as part of a data matching program. Data provided to the ATO includes cryptocurrency purchase and sale information. The data will identify taxpayers who fail to disclose their income details correctly.

6. Shares

Thinking of selling shares?  You might be liable for Capital Gains Tax (CGT) on any profits you make. CGT applies when you dispose of shares, including selling them, giving them away, or even if you stop being an Australian resident. It essentially taxes the increase in value of your shares since you acquired them.

Tax Time Thinking

Are you a Share Investor or Trader?

How you trade shares can impact how you’re taxed, here’s the difference:

  • Share Investor: You buy shares with the intention of holding them for the long term, aiming for growth or income. Frequent trading isn’t your main goal.
  • Share Trader: You actively buy and sell shares frequently, seeking short-term profits. Your trading activities resemble running a business.

Signs you might be a Share Trader:

  • You make a high volume of share transactions.
  • Your primary goal is to make quick profits.
  • You approach share trading in a business-like manner, with significant capital investment, a defined strategy, and meticulous record-keeping.

Whether you’re an investor or trader, keep good records of all your share transactions. The ATO requires details like the original purchase cost, sale proceeds, acquisition and sale dates, and any associated fees (brokerage etc.) for accurate tax reporting.

Remember

By keeping good records, understanding what deductions you’re entitled to claim, and being honest about your income, you can avoid a visit from the ATO and make tax time a breeze. 

If you’re unsure about anything, consult a registered tax agent for professional advice.

Source: AccountantsDaily
Compiled & Edited by Tailored Accounts

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