No-one wants to risk an audit by the Australian Tax Office (ATO). Avoid these four common mistakes to stay off the ATO radar this tax season.
1. Work-related expenses
The most common mistake individuals make in preparing their tax, is incorrectly claiming work related expenses.
It’s important for taxpayers to remember the golden rules:
- only claim something actually incurred for work purposes
- have full substantiation or evidence
- don’t claim anything you were reimbursed for by your employer
Only those who meet these criteria should proceed with a claim.
Deductions related to working from home have become increasingly complex, as many individuals fail to maintain comprehensive records or timesheets. The Australian Taxation Office is scrutinising these claims closely, and insufficient documentation often results in claims being reduced or denied.
It is essential to be fully informed regarding which work-related expenses are eligible for deduction.
2. Rental property risks
After work-related expenses, property has been identifed as the largest contributer to the tax gap. The ATO has reviewed income tax returns from property investors and observed that up to 90 percent contain inaccuracies. The extent of these discrepancies—whether minimal or substantial—remains unclear; however, the ATO has indicated increased scrutiny on individuals who own rental properties.
The major pitfall here is that individuals are unaware that rental income is taxable and therefore fail to declare it. While ATO attention to holiday homes is longstanding, the rise of platforms such as Airbnb has made it easier for taxpayers to offer secondary residences for short-term rentals, prompting closer examination.
To maintain compliance, accurate records must be retained for the rental period, all income received and associated expenses. It is important to note that if a property is not genuinely available for rent throughout the entire year, the ATO expects an appropriate apportionment of deductions based on actual use, and will assess whether this division is reasonable.
3. Sharing economy and crypto
Those moonlighting with Uber, Airtasker or similar should take note – the sharing economy is also setting off alarm bells at the ATO and is being closely monitored. The ATO knows who is working in the shared economy and expects to see that disclosed. Failing to report earnings can trigger an audit.
Cryptocurrency investors are also tracked by the ATO which has information about who invests through crypto currency exchanges. Undisclosed investments may result in a request for explanation.
4. Super contribution
Tax time presents a good opportunity to review your superannuation arrangements. Under current tax rules, you can claim up to $30,000 in deductions for concessional contributions made during the financial year.
Many people may not be aware of how their super performed over the past year, so it’s wise to take some time to check and assess your fund’s progress.
If you are unsure about any of these key focus areas for the ATO this year, please contact us to discuss your personal circumstances and ensure your claims are accurate.