ATO hit list: What the tax office is expected to be cracking down on this End of Financial Year

Tax time is nearing, with the financial year ticking over on July 1, 2024.

If you are lodging your own tax return, you need to do so by October 31.

Every year, the Australian Taxation Office (ATO) focuses on areas where taxpayers are prone — either accidentally or deliberately — to make errors, director of tax communication at H&R Block Mark Chapman said.

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The ATO are likely to be looking in particular at:

• Record-keeping;
• Work-related expenses;
• Rental property income and deductions;
• Sharing economy income;
• Capital gains from crypto assets, property, and shares.

The ATO recently claimed that there was an $8.7 billion shortfall between the tax individuals are expected to pay and the tax they actually are paying, Chapman said.

Work-related expenses

Work-related expenses are likely to be the biggest element in this “tax gap” and are expected to be a large focus of the ATO, he said.

“The way these could be claimed changed last year, with the introduction of a new 67 cents per hour fixed rate and enhanced substantiation requirements,” Chapman said.

“We expect the ATO to check claims thoroughly, particularly to verify whether taxpayers have a record of all their working from hours over the entire tax year, in the form of timesheets, a diary or copy of work rosters.”

Deductions for occupation costs like rent, rates and mortgage interest will also be under the spotlight, Chapman said.

These deductions are not allowed unless you’re actually running a business from home.

The ATO will also be on the lookout for anyone intentionally or accidentally “double-dipping” by claiming the working from home rates and mobile costs separately, for those claiming the 85 cent per kilometre flat rate available for journeys up to 5,000kms without having travelled this far, and for those claiming work-related expenses of $300 or less without receipts when they have not incurred costs this high.

“H&R Block’s top tip before making any claim is to be confident that you understand what you can and can’t claim and that you have the necessary proof that you actually incurred the expenditure and that it was work or business related,” Chapman said.

Keeping your invoices and receipts organised will make this easier, he said.

Property related deductions

Property-related expenses will also be a focus for the ATO this year, Chapman said.

It will focus on “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”, he said.

The ATO will also look out for the incorrect apportionment of rental income and expenses between owners, holiday homes being claimed as rental properties and immediate claims for repairs on newly purchased rental properties.

Again, H&R Block recommends keeping good records to ensure your claims can be substantiated.

Other focuses

The ATO will also crack down on profits gained through platforms like Uber, Airtasker and Airbnb, and will receive reports from some of these platforms which it can use to highlight data mismatches.

Taxpayers who invest in cryptocurrency will also now be scrutinised more intensely, with new resources available to the ATO.

“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.

At the end of the day, the best thing you can do is keep thorough records to back up your claims, and to contact a tax accountant if you are unsure about what you can and cannot claim, he added.