Preparation is key

As you prepare for tax time, you should be aware of a few things the ATO are on the watch out for this year.

Key points:

  • The ATO spent last year focusing on delivering COVID stimulus payments but will now ramp up its reviews of taxpayers
  • Deductions under close watch include work-from-home expenses, general work-related expenses and rental claims
Richard Simms Founder

This year the agency will have its eye on work-from-home expenses and rental property claims, and will also be chasing hidden income earned by gig economy workers and cryptocurrency traders (this will be in next weeks email).

Tax time spokesman assistant commissioner Tim Loh told ABC News that for most of last year the ATO had to shift its focus towards delivering COVID-19 stimulus benefits such as JobKeeper, super early withdrawal and business cashflow boost.

While the ATO will continue to support taxpayers through the pandemic, he said the agency will also ramp up its work to address key risks to the tax and super system.

Here are the areas the ATO has set its sights on this tax time.

Work-related expenses slightly dipped during COVID, but work from home expenses went up.

In 2019-20, about 8.5 million Australians claimed almost $19.4 billion in work-related expenses.

This is down from $20.7 billion claimed by 8.9 million people in 2018-19.

Work-related expenses 2018-19

  • Car: $7.9b, claimed by 3.4m people
  • Travel: $2b, 1.4m
  • Clothing: $1.6b, 6.1m
  • Self-education: $1.1b, 0.5m
  • Other: $8.1b, 7.3m

In total, $20.7 billion was claimed by 8.9 million people

(Source ATO taxation statistics)

Work from home expenses leaped by about 40 per cent during COVID-related lockdowns.

The ATO says how people apportion expenses for working from home will be under watch, however the ATO would also expect certain deductions, such as travel and car expenses, laundering uniforms and business trips, would have reduced.

The ATO will be paying close attention to how people apportion items such as internet and telephone costs between private and business use, and expect people to keep good records of the number of hours worked at home.

Those working from home watch Netflix on their time off cannot claim their full internet cost as a work-related expense.

The ATO has almost 40 occupation and industry guides outlining the work-related expenses people working in these occupations can and cannot claim deductions for.

The ATO says specialised workers can claim for tools they use in the workplace.

For example: Hairdressers can claim for the cost of tools and equipment they use for work, like scissors or other hair styling tools. Furthermore, bike couriers may be able to claim the depreciation of their bicycle, but will need to calculate and only claim the work portion of the use of the bicycle.

One million Australians used 80 cents per hour tax shortcut last year

In response to the expectation that work from home claims would rise due to pandemic lockdowns, last year the ATO introduced a new shortcut method.

This method allows people to claim 80 cents per hour for all their running expenses, rather than needing to calculate specific running costs.

Claiming tax deductions for working from home due to coronavirus is being made easier

Illegitimate claims on rental properties under fire

ATO taxation statistics show that fewer landlords have been making losses on renting out their properties, largely because of lower interest rates.

Of almost 14.7 million people who filed tax returns in 2018-19, there were 2.24 million landlords and almost 59 per cent of them continued to lose money (excluding potential capital gains), on average declaring a net rental loss of $1,352.

But that loss shrank from $1,623 the previous year, when 60 per cent of landlords had greater expenses than rental income.

Some examples of problematic claims include people refinancing and doing kitchen renovation in the home they are living in, but claiming the mortgage interest bill on their rental property.

He also said the agency was still seeing people claiming travel that was of a personal nature and not directly related to work engaged on the rental property.

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