Three claims the ATO is watching for this year
Last month we saw the beginning of the new financial year and the closing of the last, which means if you earned an income in the last 12 months, it’s time to go through your income and deductions so you can prepare and file a tax return.
Many Australians are hoping for a tax refund to relieve cost-of-living pressures. Being aware of what the Australian Tax Office (ATO) is targeting at the moment, can help get your return processed quickly and seamlessly.
The ATO has given advice to taxpayers not to rush through their tax returns, as any mistakes or omissions will likely hold up their refunds.
“We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,” ATO assistant commissioner Rob Thomson said.
The ATO have also announced 3 key focus areas for this tax season, so here’s what you should be paying extra attention to before you file your tax return.
1. Work-related expenses
Many workplaces have adopted flexible working arrangements since the COVID-19 pandemic, which allows some Australians to now have hybrid roles where they work from home part of the week, rather than being in the office full time.
With working from home there are a variety of expenses that are valid, but you are required to have valid records to support these expenses. The ATO is watching for taxpayers who may overclaim for these expenses without the valid records.
There are two methods that can be chosen from when filing a return, one being the ‘fixed rate’ method and the other being an ‘actual cost’ method. The ‘fixed rate’ method means you can claim 67 cents an hour, but to do so must be able to substantiate your time working from home. An easy way to do this is by keeping a diary or a spreadsheet of your work from home time.
“Copying and pasting your working-from-home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.” Mr Thomson said.
2. Rental property claims
There are a number of legitimate expenses you can claim if you own an investment property, however the ATO have said its common that owners get their income tax returns wrong. This can hold up the process and raise red flags.
Because of this, rental property claims will be firmly in the ATO’s sights this year.
“We encourage rental property owners to carefully review their records before lodging their return and take care to ensure they are claiming deductions correctly,” Mr Thomson said.
Common mistakes when it comes to investment property claims include not keeping proper records and claiming an immediate deduction for renovations (which are classed as capital improvements).
3. Additional income
As mentioned earlier by Mr Thomson, pre-filled tax information isn’t always readily available and in by 1 July.
Taxpayers can end up having to make amends to their returns once additional information comes through because of this. Additional information can include dividends, extra work income or health insurance information.
“We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge,” Mr Thomson 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 unnecessary delays.”
If you’d like to learn more about what you can and can’t claim, visit the ATO website.
Navigating tax season doesn't have to be a stressful ordeal. By understanding the Australian Tax Office's key focus areas, including work-related expenses, rental property claims, and additional income reporting, you can prepare your tax return with confidence and accuracy.
Remember to keep meticulous records, double-check for any missing information, and consider waiting until all pre-filled data is available before lodging your return.
Taking these steps will not only help you avoid common mistakes but also expedite the processing of your refund. Stay informed and proactive, and you'll find that tax season can indeed be pain-free.
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