The Australian Taxation Office (ATO) has identified three key focus areas for Tax Time 2023: rental property deductions, work-related expenses, and capital gains tax. The ATO aims to address common mistakes and assist taxpayers in ensuring accurate claims.
Rental Property Deductions:
The ATO's analysis reveals that 90% of rental property owners make errors on their tax returns. Common mistakes include omitting rental income and inaccurately claiming deductions for property-related expenses. The ATO advises property owners and tax agents to review records thoroughly and exercise caution. They specifically emphasise the correct allocation of interest expenses for loans used for private purposes and the need to claim only the portion related to rental income.
Work-Related Expenses:
The ATO acknowledges the changing nature of work arrangements and warns against blindly copying and pasting claims from previous years. With many individuals returning to the office, it is crucial to update claims to reflect current circumstances. The ATO focuses on ensuring taxpayers understand changes in working from home deductions and have the necessary documentation. Taxpayers can choose between the actual cost method and the revised fixed rate method for claiming working from home expenses, provided they meet eligibility criteria and maintain proper records.
Capital Gains Tax:
Taxpayers must calculate gains or losses for each asset unless an exemption applies. While the sale of a main residence is generally exempt, the ATO reminds taxpayers that if their home has been used to generate income, such as through short-term rentals or home-based businesses, capital gains tax may apply. Maintaining accurate records of the income-producing period and the portion of the property used for income generation is crucial. Taxpayers are urged to declare all assets sold for a gain to ensure compliance.
The ATO acknowledges the challenges faced by taxpayers and offers support and resources. Given the possibility of smaller refunds or tax debts, individuals are encouraged to seek help early and communicate with the ATO or their registered tax agents. Proactive engagement and collaboration are key to finding effective solutions and meeting tax obligations.