The ATO has stated that it has three key targets this tax time:
- Rental property deductions;
- Work-related expenses; and
- Capital gains tax.
For rental properties, the ATO states a review of income tax returns showed that 9 in 10 rental property owners are getting their return wrong. The ATO often sees rental income being left out or mistakes being made with property related deductions. This is surprising given 87% of individual rental property owners are using a registered tax agent to prepare their tax return. The ATO is focusing on interest deductions relating to rental activities and has recently implemented a residential investment property loan data matching program to improve compliance in this area.
With work related deductions, the ATO notes that working patterns have shifted for many people over the last couple of years and that taxpayers and their agents should not be tempted to copy and paste deduction details from the previous year return. The ATO will be focusing on the new work from home deduction method and the associated record keeping requirements. To use the revised fixed rate method, clients will need a record of all the hours they worked from home from 1 March 2023. The ATO has warned that it will no longer accept estimates or a sample diary over a four-week period. For the period between 1 July 2022 to 28 February 2023, the ATO will accept a record which is representative of the total number of hours worked from home.
When it comes to the CGT rules, the ATO will be focusing on the application of the main residence exemption in situations where the property has been used for income producing purposes. The ATO is also focusing on the recognition of the disposal of capital assets such as shares, crypto assets, managed investments or properties.