Author: Tony Rule, Partner, TAG Financial Services
Time to “Pay the Piper”?
It has been just over 2 years since Australia’s biggest economic stimulus (in the form of JobKeeper) commenced. And whilst Covid-19 is still a threat to the health and productivity of Australians and JobKeeper is long gone, the Australian Taxation Office (ATO) have announced their tax targets for the current year with a view to raising tax revenue to fill the resulting deficit.
This year, the ATO will be focusing on 4 key areas:
- Record-keeping
- Work-related expenses
- Rental property income and deductions
- Capital gains from crypto assets, property and shares
Record-keeping
The ATO have recently embarked on their first wave of “Please Explain” letters with over 200,000 requests for more information being issued to taxpayers in the last few months.
These letters cannot be ignored as the ATO will proceed to amending tax returns and potentially applying penalties for discrepancies. These letters will usually request supporting documentation for substantial claims. It is critical that you retain your records. It is important to note that the ATO receive and match a lot of information on:
- rental income,
- foreign sourced income and
- capital gains events involving shares, crypto assets or property,
but they don’t pre-fill all of that information, so the onus is on taxpayers to ensure all information is being correctly provided.
Further information:
How to Marie Kondo your tax records
Work-related expenses
To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the:
- shortcut (all-inclusive),
- fixed rate and
- actual cost methods, so long as you meet the eligibility and record-keeping requirements.
The ATO understand that:
“Each individual’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense.”
The ATO are also watching for those people working from home as they should have a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls.
Further information:
Rental property income and deductions
If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.
The ATO are encouraging taxpayers to keep good records, as all rental income and deductions need to be entered manually. If they notice a discrepancy it may delay the processing of your refund as they ask questions to verify your return. Further information:
ATO Residential Rental Property Information
Capital gains from crypto assets, property and shares
If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.
Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.
The ATO have noted that:
“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year.”
They are also watching to make sure that crypto losses are not being offset against salary and wages. The ATO’s data collection processes extend to taxpayers that are buying, selling or exchanging digital coins and assets so it is important taxpayers disclose this information to reduce potential future penalties.
Further information:
ATO Crypto Asset Investment Information
Whilst these target areas are not earth shattering in themselves, the ATO’s “Please Explain” campaign is just the beginning of a renewed focus on collecting tax revenue and the end of “working with the taxpayer to get through Covid”.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.