The Australian Taxation Office (ATO) has identified three main areas of focus for Tax Time 2024:
- Incorrect claims for work-related expenses
- Overstating deductions related to rental properties
- Failure to report all income accurately when filing tax returns
According to ATO Assistant Commissioner Rob Thomson, these are the areas where taxpayers commonly make errors. Thomson emphasised the importance of accuracy in tax lodgments, urging taxpayers to ensure their claims are substantiated with proper records. Specifically:
- Work-related expenses: The ATO noted that in 2023, more than 8 million people claimed work-related deductions, with half of them related to home office expenses. Changes to the fixed rate method for home office deductions are now fully implemented this financial year, necessitating detailed records such as calendars or bills to support claims.
- Rental properties: The ATO highlighted issues with repair and maintenance deductions, cautioning against inflating claims to offset rental income increases. It clarified that while immediate deductions are allowed for general repairs like replacing damaged items, major improvements are treated as capital expenditures and deducted over time.
- Timely lodgment: Thomson advised against early lodgment in July without waiting for pre-filled income information, which often leads to omissions such as bank interest or dividends. Waiting until the end of July ensures accuracy and minimizes the need for amendments.
Overall, Thomson stressed the importance of accurate record-keeping and cautioned against copying previous year’s claims without review, as this could lead to disallowed deductions and potential queries from the ATO.
In addition to the areas being flagged by the ATO, we are seeing an increase in audit and review activity by the ATO whereby they are using data matching between lodged returns and information available through public registers, particulary with respect to FBT. We are also expecting a continued focus on family arrangements and structures used by professionals, including medical professionals, engineers, directors and financial services professionals.
If you have any concern with regards to your affairs and whether they fall within the ATO’s audit targets, feel free to reach out to your advisor at Abbotts for further information.
