The Australian Taxation Office has always carefully looked into and evaluated the tax returns of millions of Australians each year. However, this financial year is a little bit different, with changes in the ATO’s primary focus. There is increased scrutiny in various areas, including:
- Work-related expenses
- Deductions for rental costs
- Capital gains from investments, specifically property, shares, and cryptocurrency
The above information was provided by the ATO. However, the government agency advised Aussies not to rush and lodge their tax return in early July. This recommendation applies even if you’re among those individuals expecting to get bonus cash.
According to an ATO spokesperson, it is a common mistake for taxpayers to file their tax returns in early July. People think it is a good tactic, perhaps to simply get the task out of the way. But as a result, they forget to add their bank incomes and shares dividends, as well as those from the cryptocurrency exchange and economy platforms.
What Propelled the Slight Change in ATO Targets?
Due to the pandemic, many Australians have started working from home from the previous year to this financial year. And the ATO has them all on the agency’s hit list. If you’re a rental property owner or a gig economy worker, you are under heavy scrutiny, as well. You’re not safe either if you earn from cryptocurrency or receive payments in cash. This focus may be because many work-from-home individuals try to claim too much from their work-related expenses come tax return.
Let us take a closer look at these ATO targets:
Rental Property Owners
For a long time now, you may have noticed that the ATO has been consistently observing Australian rental property owners for several years now. This year will not be any different. Why is the ATO putting so much attention on Aussies with rental properties? One common mistake that the ATO has observed is that they claim initial repairs. In many cases, the ATO has also seen several rental property owners who claim capital improvements as a deduction.
The agency had emphasised that initial repairs are for rectifying damage, flaws, and other issues that existed when the property was purchased. Therefore, the repair costs are considered capital improvements and will not be counted as deductibles. This condition applies even if the owner carries out the repair to ensure that the property is suitable for renters.
It’s also vital that rental expenses be adjusted if the owner uses the property for personal purposes. Unfortunately, the ATO has seen that many Aussies do not perform such an adjustment.
Gig Economy Workers
Do you advertise on the Internet via Airbnb, Airtasker, Stayz, or Uber? If so, you should remember that the ATO can access income information from those ride-sharing and food delivery platforms. Your guests or customers are most probably paying electronically, so the ATO will find out about the transactions.
Cash Payment Receivers
How about if you get paid in cash? It’s perhaps more complicated for the ATO to track. However, the law states explicitly that any income you get has to be declared in your tax return. The amount does not matter, even if it is small. The payment method is also not an issue, so you should list the cash payment in your tax return.
It’s easier for those who receive cash to dodge the tax office. But the ATO will eventually find out, and you do not want to be on their permanent watchlist. COVID restrictions have indeed forced many transactions to turn to digital payments. However, it does not mean that the agency will let unrecorded cash payments pass. The Black Economy Taskforce of the ATO is incredibly resourceful. In the 2019-20 financial year, more than $690 million was uncovered to have been undocumented cash collections.
Home Office Workers
If you work from home, you should always log your work-related use of your home office. The expenses typically include computer, Internet, and electricity costs. The ATO has introduced a new yet temporary way to calculate home office use, which is explained below. The shortcut involves computing home expenses for a steady rate of 80 cents per hour instead of the standard fixed rate of 52 cents and actual cost methods.
This shortcut method, though, can be tempting for some work-from-home employees to become a little greedy. It provides an opportunity for people to get up to $1,440 worth of deductions, particularly those working 37.5 hours for 48 weeks.
As with other expenses, it is essential to be transparent with all the costs without claiming deductions for home expenses.
Just a few months ago, many Aussies received “love letters” from the ATO. The letter contained reminders to declare their income from their cryptocurrency transactions. If you’re a crypto trader, you probably got a notice, as well. Like shares, crypto offers capital gains, which should be declared in your tax return.
A common misconception is that earnings do not have to be declared if they are not converted to cash. So, if you have a digital currency, it should be listed in your tax return. Now is also not the time to neglect non-fungible tokens, which are among the latest fads in the crypto world. Those NFTs will soon be on the agency’s radar, so you should declare them, too.
What You Can Do This Year
As mentioned, the ATO advises that you wait for pertinent information, such as dividends from cryptocurrency and shares, before filing for a tax return. Those details are often completed and automatically included in tax returns in the last week of July. In doing so, you avoid common mistakes that may result in delayed receipt of refunds.
What if you want to lodge your tax return earlier? You do not have to wait if you are willing to take care of the manual addition of all your income in your tax return. It does entail more work and requires more time on your part, but it will save you a lot of headaches in the coming months.
If you currently work from home, the ATO has provided a shortcut method that will allow you to claim work from home expenses. This method pertains to an all-inclusive rate of 80 cents per hour for people working from home. So, suppose you have always found it difficult to calculate the costs for particular work and personal expenses separately. In that case, this shortcut gets rid of it for you. You do not need to apportion work and home components, which saves a lot of time.
The only requirement for this temporary shortcut method is to have a record of the number of hours you have worked from home. It is like using a timesheet.
Now, what if you earn income overseas? The requirement stays in which you have to declare all your income to the ATO, regardless of where it is from. The agency has treaties with 45 countries across the globe, which means that it can easily exchange information about any income transactions and incomes earned offshore. The data received will be compared to your tax return, including worldwide and Australian-sourced revenues.
Are you ready to lodge your tax return for 2021? We understand that correctly crunching the numbers is not an easy part of being a responsible taxpayer. And the task is made even more difficult and confusing due to all the complications brought about by the coronavirus pandemic. The ATO expects Aussies to submit their claims before the deadline. Let us help you get your affairs in order.
Contact us on how TaxReturn.com.au can assist you in lodging your tax return for this financial year.