May 31 - Books - Tax Accounting

The Three ATO Focus Areas For 2024 Tax Time

Every year, we get a heads up as to which areas the ATO will be paying extra attention to during the tax season. They’ll pick apart common things that people accidentally (or deliberately) get wrong on their returns to crack down on. Here are the focus areas for 2024.

Rental property claims

The ATO’s review of last year’s tax returns showed that 90% of rental property owners included errors in theirs – in relation to their property claims. This is a highly legislated area of tax that undergoes regular changes and keeping on top of what you can and can’t claim and the specifics around each is hard for accountants, let alone the lay person. If you are not an Australian resident for tax purposes, this is an area that you’ll need to pay particular attention to – the tax obligations around the foreign resident capital gains withholding regime (FRCGW) are as painful as the name is to read 😉

An area that does apply to all rental property owners is what you can and can’t claim when it comes to repairs and maintenance. In a nutshell: if you are maintaining and/or repairing an existing piece of your home – for instance a window pane that has broken, then this is a deduction. If, however, you are paying for that window to be changed into a bigger or nicer version that will add value to your property, it is a capital work and therefore the deduction for the cost of works happens across 40 years from the date it was completed (in other words it’s a depreciation). So claim for what’s there already and don’t claim for an expense that is an improvement to the house by nature. Capeesh?

If you’re a vacant land owner, you aren’t entitled to any kind of tax deduction for the maintenance and upkeep of that land if it’s residentially zoned. Until you’re actively seeking income from it, it’s not considered a rental property.

For more details on tax deductions and rental properties, head to this article.

Work-related claims (particularly WFH)

Covid and lockdowns meant changes in WFH and tax implications but those allowances are no longer. To calculate working from home expenses and therefore what kind of tax deductions you’re entitled to, the fixed rate or actual cost methods can be used (rather than the shortcut method that was available until 2022). You can find the info on both of these methods here.

For a quick estimate, head to the ATO home office expenses calculator.

Items commonly claimed that are not actually deductions are general household items like cleaning products or tea and coffee. These aren’t expenses directly related to earning your income (you’d be buying them anyway). If you’ve purchased a laptop for your kid and try to claim that as a WFH expense… you’ll need to be able to prove that it is in fact for you (in other words your employer doesn’t provide a laptop for you already).

Another common pitfall is copy/pasting the same WFH claims from their last tax return. Remember, AI is watching! And it’ll flag it. You’ll need receipts and records to show everything you’ve claimed is accurate (and there’s no way that figure will amount to the same as last year – down to the dollar).

Finally, make sure you aren’t claiming an expense that you have already been reimbursed for by your employer.

Failure to report all income – don’t rush your tax return lodgement!

We get it – you see the end of June in your calendar and you rub your hands together thinking about the ‘free’ money (spoiler: it’s not free) that’ll land in your bank account as soon as you lodge your return. The haste often means mistakes – in particular a failure to report all income sources. Hold your horses and be thorough. Go through the checklist that your accountant has provided and be sure that you’ve ticked all the boxes – dividends, private health related items and interest income are oftentimes missed. 

Our biggest tip when it comes to tax time? Pay the money to have an accountant do it. Yes you’re right, we’re biased. But the money you spend is a deduction (!) and it’s highly likely that you’ll receive more than that amount in your return anyway because we know the ins and outs of the tax system in a way that only a professional can. 

We’ll be opening our bookings for individual tax returns shortly. The best way to know when exactly that is? Hop onto our mailing list.