A tax expert has lifted the lid on what the ATO will be watching for most this end of financial year, with work-from-home related expenses and investment properties at the top of the list.
The ATO has calculated an $8.7 billion shortfall between what Australians should be paying in tax and what the tax office actually collects.
H&R Block’s Director of Tax Communications said working-from-home related expenses are the “biggest element” when it comes to lost tax, with the ATO set to look closely at the area this tax season.
He noted the new 67 cent per hour fixed rate and “enhanced substantiation requirements” being introduced last year.
“Similarly, in relation to working from home, deductions for ‘occupation’ costs like rent, rates and mortgage interest are under the spotlight as they are not allowable unless you’re actually running a business from home,” Chapman said.
Mobile phone and internet costs will be in focus, such as individuals claiming the whole bill as being work-related or those who may be “double-dipping” – meaning those who claim the fixed rate for working from home as well claiming mobile costs separately.
Chapman revealed the other major area the ATO will focus on is investment properties and holiday homes, finding errors in 90 per cent of returns reviewed in a series of audits.
Particular details the ATO will look out for include “excessive interest expense claims” – such as where property owners have tried to claim borrowing costs on the family home as well as their rental property.
Chapman said it will also look at cases where deductions on a jointly-owned property are claimed by the owner with the higher taxable income, rather than jointly.
Claims related to holiday homes will be under careful scrutiny as property owners should only claim for the periods the property is rented out or is “genuinely available for rent”.
Chapman also said when it comes to newly purchased rental properties, costs for damage repair for defects existing at the time of purchase can not be claimed immediately.
“These costs are deductible instead over a number of years,” he said.
Other areas of interest to the ATO include workers in the sharing economy under Uber, Airtasker or other sharing economy platforms, as some workers may not be properly declaring their profits and gains.
Those renting out properties through Airbnb and Stayz will similarly be under the department’s careful watch.
“The ATO has numerous third-party sources of data which it can use to identify if you are receiving rent and they are on the look-out for mismatches with the tax return data that you report,” Chapman said.
With the ATO estimating around 500,000 to one million Australians are investing in crypto-assets, Chapman says this will be another element scrutinised during tax time as some individuals fail to declare their profits and losses on their investment.
“To help them in their search, the ATO is collecting bulk records from Australian cryptocurrency designated service providers (DSPs) as part of a data matching program to ensure people trading in cryptocurrency are paying the right amount of tax,” Chapman said.
“Data provided to the ATO includes cryptocurrency purchase and sale information. The data will identify taxpayers who fail to disclose their income details correctly.”