Crypto, property and labor spending in the ATO crosshairs
The new daily regret to inform readers that there are less than three months left until tax time.
And the Australian Taxation Office (ATO) is already preparing its so-called “hit list” of priority areas for a crackdown in the 2021-22 financial year.
According to accounting firm H&R Block, property owners, crypto investors and those working in the gig economy will be the main focus of the tax office.
Also on the list are claims for work-related expenses, an area the ATO has named as the main driver of Australia’s $8.7 billion annual fiscal deficit.
“[The ATO] have signaled that they will be looking closely at these deductions this year,” H&R Block said in a statement Thursday.
It’s worth familiarizing yourself with the ATO results list, as it could save you a nasty surprise at tax time. Especially if you match one of the profiles on the ATO hit list.
If you’re covered by the ATO’s list, you’ll have some of the most complex tax cases in the country and better not leave it all until the last minute.
Claims for reimbursement of work-related expenses
The ATO has identified dubious work-related expense claims as the main driver of Australia’s tax gap – the difference between the tax people should pay and what they actually pay.
With that in mind, here are the expense reports the ATO has its eye on:
- Work clothes : The ATO expects fewer claims for dry cleaning and laundry costs due to COVID-19 and increased work from home. So if you make any of these claims, you need to substantiate it
- Deductions for home offices: Claims for occupancy costs like rent or mortgage interest are on the ATO’s radar because they’re not allowed
- Mobile phone and internet charges: The ATO is monitoring those who attempt to claim their entire personal phone bill as a business expense. The rules state that you should only claim the portion of the bill related to business use
- Incorrect use of receipt rule: The ATO is concerned that taxpayers are taking advantage of the $300 threshold to make refund claims without receipts.
Real estate investors
H&R Block expects the ATO to focus on people claiming a deduction for their real estate investments or vacation homes in 2021-22.
Indeed, the tax office recently reviewed the tax returns of some real estate investors and, worryingly, found errors in 90% of them.
H&R Block says the ATO will be on the lookout for the following:
- Double claim for interest charges: Homeowners trying to reclaim borrowing costs on family home and rental properties
- Incorrect allocation of rental income: Deduction claims on jointly owned property claimed by a single owner (with higher taxable income) rather than jointly between the two owners
- Holiday homes that are not actually rented out: Landlords are trying to claim rent deductions for periods when the house is not rented to a third party
- Weaknesses for new rental properties: Claims to immediately recover the costs of repairing damage to newly purchased rental properties rather than claiming them over a number of years (as appropriate for tax deductions).
H&R Block’s key tip for real estate investors is to get your records in order.
“The rule of thumb is: if you can’t prove it, you can’t claim it.”
Crypto is once again in the ATO’s sights this fiscal year after a huge push to bring digital currency investors under the fiscal umbrella last year.
H&R Block says the ATO studies between 500,000 and one million crypto owners in Australia, using data from major exchanges to capture everyone.
In other words, if you hope to hide your crypto, you may be caught off guard.
“The ATO believes that some of them [crypto owners] do not report the profits (and in some cases losses) they make on their investments,” H&R Block said.
“Remember that investing in cryptocurrencies may result in capital gains tax on profits. Trades may be taxed on their profits as business income.
The sharing economy is also becoming an area of focus for the ATO again – they’ve even posted a few examples of their concerns.
- Carpooling fees: Incorrectly reporting expenses related to carrying passengers for a fare (i.e. driving Uber, DiDi or Ola)
- Rent a room : The ATO believes Airbnb hosts are demanding full Capital gains tax exemption for principal residence despite renting a room through sharing economy platforms
- Expenses for piecework: Those who work on task platforms like Airtasker can expect more scrutiny of their expense reports.