At Financially Sorted, we understand that navigating the complexities of tax time can be overwhelming. That’s why we’re here to help you make the most of your tax benefits and ensure compliance with the Australian Taxation Office’s (ATO) regulations. In this article, we’ll dive deep into three key focus areas identified by the ATO for this tax time: rental property deductions, work-related expenses, and capital gains tax.

The ATO announced on the 15 May 2023 that this tax time, its 3 key focus areas for this Tax Time are:

    • Rental property deductions, and
    • Work-related expenses, and
    • Capital gains tax.

The ATO’s confirmation was that it’s continuing to prioritise areas where they often see mistakes being made. Within these areas, they have identified common mistakes, and are particularly focused on addressing these to get the claims right this year.

Rental Property Deductions: Landlords – Listen Up!

The ATO’s review of income tax returns showed that 9 in 10 rental property owners are getting their income tax return wrong, and often sees rental income being left out, or mistakes being made with property related deductions – like overclaiming expenses or claiming for improvements to private properties.

Around 87% of individual rental owners use a registered tax agent to assist in the preparation their income tax returns. The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).

Beware – you can only claim interest on a loan used to purchase a rental property to earn rental income. The ATO is cracking down on what you can claim. If your loan also includes a private expense, such as for a new car or a trip to Bali, you can only claim an interest deduction for the portion relating to producing your rental income.

To further assist you the ATO has sophisticated data matching capabilities which include rental property-related data and has recently implemented a new residential investment property loans data matching program. This is just one example of the work the ATO are doing to help you get your income tax return right and make sure people are claiming expenses correctly.

For a more in-depth understanding, download our Rental Property Guide.

 

Work-Related Expenses – Adapting To Changing Circumstances

The ATO continues to see shifts in the way Aussies are working, and it’s important to consider whether your claims reflect your working arrangements this financial year.

There have also been some changes in how you calculate things like working from home deductions. When it comes to claiming work-related expenses, avoid the ‘copy-paste approach’ from previous years. We know a lot of people are working back in the office more compared to last year. it’s crucial to accurately calculate deductions for working from home.

The ATO is particularly focused on ensuring taxpayers understand the adjustments to working from home methods and have the necessary supporting evidence for their claims.

Our article will provide clarity on claiming actual costs or using the revised fixed rate method, based on your eligibility and record-keeping requirements. By keeping meticulous records, you’ll have the flexibility to choose the most suitable method for maximizing your deduction this tax time. For more information, visit https://www.financiallysorted.com.au/ato/working-from-home-changes-in-2023/

Rental property deductions ATO
Capital Gains Tax: Have You Considered All Assets?

Capital gains tax (CGT) comes into effect when you dispose of assets such as shares, crypto, managed investments, or properties. To ensure you are meeting your obligations and paying the right amount of tax, you need to calculate a capital gain or capital loss for each asset you dispose of unless an exemption applies.

While your main residence is generally exempt from CGT, there are instances where it may apply. For example, if you have utilized your home to generate income through sharing economy platforms like Airbnb or Stayz, or if you run a business from home. Understanding the income-producing period and accurately calculating the portion of the property used for income generation is crucial in determining your capital gain.

It’s important to note that the ATO’s technology enables thorough data analysis, leaving no room for undisclosed gains. We strongly advise against neglecting to declare any assets sold for a gain, as the consequences can be severe. Don’t fall into the trap of thinking the ATO won’t notice if you sell an asset for a gain and don’t declare it – the technology the ATO now utilises in far reaching. We know many people are doing it tough this year. We have a range of resources available to help. 

 

What We Can Do

If you find yourself feeling overwhelmed or falling behind with your tax obligations, don’t hesitate to reach out to us as early as possible. We’ll work with you to find a solution tailored to your specific circumstances. Avoid burying your head in the sand—take proactive steps to secure your financial future. Contact us today, to understand how this can affect you. 

 

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