Every tax time, the Australian Tax Office (ATO) focuses on certain hotspots where taxpayers are prone—either accidentally or deliberately—to make errors. So, what are the ATO tax focus areas for 2024? Expect them to be looking in particular at record-keeping, work-related expenses, rental property income and deductions, sharing economy income, and capital gains from crypto assets, property, and shares. Let’s take a look at each of those areas below to understand why they will be receiving so much attention from the ATO this year.
Record-Keeping: A Key ATO Tax Focus Area
Record-keeping is essential for all taxpayers to ensure compliance with ATO regulations. The ATO requires meticulous records to substantiate claims made on tax returns. Poor record-keeping can lead to disallowed deductions, penalties, and even audits.
Importance of Detailed Records
Maintaining detailed records is crucial for substantiating claims. This includes keeping receipts, invoices, bank statements, and any other relevant documentation. The ATO expects taxpayers to keep these records for at least five years.
Common Mistakes in Record-Keeping
Common errors include failing to keep receipts, not recording all transactions, and not maintaining a logbook for car expenses. To avoid these pitfalls, taxpayers should use digital tools to organise and store records efficiently.
Work-Related Expenses Under ATO Scrutiny
The ATO recently claimed that individuals are paying $8.7 billion less in taxes than they are expected to. The ATO believes that work-related expenses claims are the biggest element in that “tax gap” and have signaled that they’ll be looking closely at these deductions this year.
Home Office Deductions
Deductions for working from home expenses have changed recently, with the introduction of a new 67 cents per hour fixed rate and enhanced substantiation requirements. The ATO will scrutinise claims thoroughly, particularly to verify whether taxpayers have a record of all their working-from-home hours over the entire tax year, in the form of timesheets, a diary, or a copy of work rosters.
Mobile Phone and Internet Costs
Mobile phone and internet costs are also under scrutiny, especially for individuals claiming the entire or substantial part of their bills as work-related. The ATO will also check for potential “double-dipping,” where taxpayers claim the 67 cents per hour working-from-home rate—which includes an element for mobile phone costs—along with separate mobile cost claims.
Rental Property Income and Deductions: A Major ATO Tax Focus
Another main focus this year is on people who claim investment property and holiday home deductions. The ATO recently announced that in a series of audits, they found errors in 90% of returns reviewed. So, this year, expect them to focus on the following:
Interest Expense Claims
Excessive interest expense claims, such as where property owners try to claim borrowing costs on the family home as well as their rental property, will be scrutinised.
Apportionment of Rental Income and Expenses
Incorrect apportionment of rental income and expenses between owners is a common issue. For instance, deductions on a jointly owned property are often claimed by the owner with the higher taxable income, rather than being split correctly.
Holiday Homes
Holiday homes that are not genuinely available for rent are another target. Rental property owners should only claim for the periods the property is rented out or marketed for rent. Periods of personal use can’t be claimed.
Sharing Economy Income: ATO’s Watchful Eye
The ATO is convinced that many people in the sharing economy are not properly declaring their profits and gains. If you obtain work through Uber, Airtasker, or any of the many sharing economy platforms, take heed. The ATO is now receiving reports from many platforms, which it can use to highlight data mismatches.
Rental Platforms
If you rent out a property (or part of one) through Airbnb and Stayz, you will be under the spotlight. 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 lookout for mismatches with the tax return data that you report.
Cryptocurrency: A Growing ATO Tax Focus
The ATO will also be taking a closer look at the booming cryptocurrency market, with focus on investments such as Bitcoin. Increasing numbers of taxpayers are jumping on the bandwagon and the ATO believes that some of them are failing to declare the profits (and in some cases the losses) they are making on their investments.
Data Matching Program
To help in their search, the ATO is collecting bulk records from Australian cryptocurrency designated service providers (DSPs) as part of a data-matching program to ensure people trading in cryptocurrency are paying the right amount of tax. Data provided to the ATO includes cryptocurrency purchase and sale information, which will identify taxpayers who fail to disclose their income details correctly.
Shares: Another Key ATO Tax Focus Area
When you dispose of shares, assuming you are an investor, not a trader, you will normally have to pay CGT on any profits. Typically, CGT arises when you sell shares but can also happen if you give them away or you stop being an Australian resident.
Capital Gains Tax (CGT)
CGT is taxed on any increase in value from the point the share was acquired. Sometimes the proceeds and cost base of the share are not what was actually paid and/or received, but rather, the market value of the asset. This is typically to prevent people from minimising their tax by, say, selling the share to a relative for a low price.
Share Traders
If you dabble regularly in buying and selling shares, you could be deemed a share trader, rather than a share investor. A share trader buys and sells shares purely for short-term profits. Gains or losses on them will be taxed as ordinary income (effectively as business profits) rather than capital gains.
Conclusion
The ATO’s focus areas for 2024 highlight the importance of proper record-keeping and accurate tax reporting. Ensuring compliance with ATO guidelines can save you from potential audits and penalties. Stay informed and diligent in documenting your financial activities, and always seek professional advice if in doubt.
Contact Us for More on ATO Tax Focus Areas 2024
Have any questions about the ATO tax focus areas for 2024? Contact our friendly team at Cotchy today for expert advice and ensure you’re fully compliant with all ATO regulations. Remember, staying informed about ATO tax focus areas 2024 can save you time and money.