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Key Focus Areas for the Australian Tax Office (ATO) in the New Financial Year

As we kick off the new financial year, let’s take a closer look at some critical areas on the ATO’s radar for individual tax-payers:

Work-Related Expenses:

To claim a deduction for work-related expenses, three threshold tests must be met:

  • The expense must have been incurred by the taxpayer and not reimbursed.
  • It must directly correlate with income-earning activities.
  • Proper records (such as receipts) must be maintained

Work-from-Home (‘WFH’) Deductions:

  • The ATO will be paying close attention to deductions related to working from home.
  • Deductions should only cover activities necessary for employment duties (not minimal tasks).
  • Last year, the ATO introduced the revised 67 cents per hour fixed rate method for calculating deductions.
  • Comprehensive records (e.g., work calendars, diaries, spreadsheets) are essential to substantiate claims.
  • When claiming WFH deductions do not include occupancy costs such as mortgage interest or rent unless you are operating a business from home.

Mobile Phone and Internet Costs:

  • The ATO will also be paying attention to taxpayers claiming substantial personal mobile and internet expenses.
  • If you choose the working-from-home fixed rate method, you cannot separately claim mobile phone and internet costs.

Rental Property Income and Expenses:

  • The ATO will continue to use data matching programs to ensure accurate reporting of rental property income and expenses.
  • Programs include landlord insurance data matching and residential investment property loan data matching.
  • Tax-payers should also ensure they are correctly reporting net capital gains from property sales where the property was used for income producing purposes.

The ATO will also target the following property deductions:

  • Immediate deductions for repairs and maintenance costs where it should be claimed as a capital improvement.
  • Interest expenses
  • Claims for expenses related to maintaining holiday homes that aren’t available for rent.

Capital Gains on Cryptocurrency Investments:

  • The ATO will continue to use extensive data matching programs to identify capital gains related to cryptocurrency trading.

Remember to stay informed and comply with ATO guidelines to avoid any issues during this tax season.

 If you have further questions, please contact your trusted WMS advisor