ATO reveals 3 areas it's cracking down on at tax time: 'Don't copy and paste'

Tax time is right around the corner and the Australian Taxation Office (ATO) has revealed the three things it will be focusing on when you submit your tax returns. There are plenty of things you can claim in your return and it's worth remembering what is and isn't legal.

The ATO has warned that work-related expenses, rental properties and income statements will all be in its crosshairs this year. ATO Assistant Commissioner Rob Thomson said they deal with issues in these specific areas every year.

"These are the areas that people are most likely to get wrong, and while these mistakes are often genuine, sometimes they are deliberate. Take the time to get your return right," he said in a statement.

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Work-related expenses

Since the COVID pandemic, Aussies have been able to claim a tax deduction for working from home as they use personal resources for work purposes.

Last year alone, there were more than eight million work-related deductions and around half of those were related to working from home.

However, the system was changed last year and will be in full effect come July 1.

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You'll now have to provide "comprehensive records" that back up your work-from-home claims as you normally would for any other deduction. Those records can be in the form of a calendar, diary or spreadsheet and you'll have to submit evidence of at-home costs like an electricity bill.

Thomson said the ATO will be watching this area intently.

"Deductions for working from home expenses can be calculated using the actual cost or the fixed rate method, and keeping good records gives you the flexibility to use the method that works for you, and claim the expenses you are entitled to," he said.

"Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records."

You can only claim a work-related expense if you spent the money yourself and weren't reimbursed, it was related to earning your income, and you have a record to prove it.

What you can and can't claim for rental properties

The ATO said nine out of 10 rental property owners are getting their income tax returns wrong and it will be looking for claims that "may have been inflated to offset increases in rental income to get a greater tax benefit".

"We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this," Thomson said.

General repairs and maintenance on a rental home can be claimed as a deduction, however, the ATO draws a line at expenses that are "capital in nature" like improvements you make on the property.

"You can claim an immediate deduction for general repairs like replacing damaged carpet or a broken window," Thomson explained.

"But if you rip out an old kitchen and put in a new and improved one, this is a capital improvement and is only deductible over time as capital works."

Wait for your income statements to come through

While many want to lodge their tax return the moment July 1 rolls around, this can cause headaches for the ATO and the applicant.

The ATO said it receives loads of tax returns where people have forgotten to include interest from banks, dividend income, and payments from other government agencies and private health insurers.

A lot of this information is usually pre-filled in your return by the end of July, however, some people don't realise this and submit it as early as possible. The ATO said if you wait a few weeks for all the details to come in, your tax return will be much more seamless.

"By lodging in early July, you are doubling your chances of having your tax return flagged as incorrect by the ATO," Thomson said.

"We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge.

"You can check if your employer has marked your income statement as ‘tax ready’ as well as if your pre-fill is available in myTax before you lodge. That way, an amendment doesn’t need to be made later, which could result in unnecessary delays."

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