The ATO has flagged four priority areas this tax season.
With tax season upon us the Australian Taxation Office (ATO) has revealed its four areas of focus this tax season.
- Record-keeping:
101 of working with the ATO is that you can’t claim it if you can’t prove it. If you are audited, the ATO will disallow deductions for unsubstantiated or unreasonable expenses. Even if the expense is below the substantiation threshold of $300 ($150 for laundry), the ATO might ask how you came up with that number.
- Work-related expenses
To claim a deduction, you need to have incurred the expense yourself and not been reimbursed by your employer or business, and the expense needs to be directly related to your work.
What expenses are related to work?
It all sounds simple enough until you start applying this rule. Take the example of an actor. To land the acting job she needs to attend auditions. She wants to claim the cost of having her hair and make-up done for the audition. But, because she is not generating income at the stage of the audition, she cannot claim her expenses. The expense must be related to how you are currently earning your income, not future potential income. The same issue applies to upskilling. If you attend investment seminars with the intention of building your investment portfolio the seminar is not deductible as a self-education expense unless it relates to managing your existing investment portfolio – not a future one. Or, a nurse’s aide who attendees university to qualify as a nurse. The university degree and the expenses associated with this are not deductible as the nursing degree is not required to fulfil the role of a nurse’s aide.
The second area of confusion is over what can be claimed for work. If the item is “conventional” it’s unlikely to be deductible. For example, you can’t claim conventional clothing (including footwear) as a work-related expense, even if your employer requires you to wear it and you only wear the items of clothing at work. To be deductible clothing must be protective, occupation specific such as a chef’s chequered pants, a compulsory uniform, or a registered non-compulsory uniform.
Work related or private?
Another area of confusion is where expenses are incurred for work purposes but used privately. Internet access or mobile phone services are typical. A lot of people take the view that the expense had to be incurred for work so what does it matter if it’s used for private purposes? But, if you use the service on more than an ad-hoc basis for any purpose other than work, then the expense needs to be apportioned and only the work-related percentage claimed as a deduction. And yes, the ATO does check usage in an audit.
Claiming work from home expenses
Last financial year, one in three Australians claimed working from home expenses. Now we’re out of the pandemic, the ATO will be focussing specifically on what is being claimed. If you claimed work from home expenses last year and returned to the office this year, then there should be a reduction in your work from home claim. The ATO will be looking for discrepancies.
- Rental property income and deductions
For landlords, the focus is on ensuring that all income received, whether long-term, short-term, rental bonds, back payments, or insurance pay-outs, are recognised in your tax return.
- Capital gains from crypto assets, property, and shares.
In Australia, individuals transacting with cryptocurrency may incur tax liabilities in the form of Capital Gains Tax (CGT) or Income Tax. The type of tax payable (as well as the quantity of how much) will depend on the type of transaction in question. As an example, crypto to crypto swaps (such as swapping an amount of Bitcoin for an equivalent amount of Ethereum) incurs capital gains tax, whereas receiving an airdrop would incur income tax.
Due to the likely volume of cryptocurrency transactions in a tax year, and its impact on increased preparation time of your tax return, we recommend considering https://cryptotaxcalculator.io/au/. It is an ATO approved app that feeds from all your crypto wallets to calculate the capital gains on your transactions. While is does have fee, the cost of this compared to the accounting fees to manually calculate the impact of your crypto transactions for each tax year will be a huge saving.