CPA Australia's Guidance on ATO's Tax Focus Areas for 2023

As tax season approaches, CPA Australia has highlighted key areas where the Australian Taxation Office (ATO) will be paying extra attention. Here are crucial insights and tips to help individuals and businesses avoid complications with their tax claims.

Avoid Disproportionate Expense Claims

Both companies and individuals should steer clear of making disproportionate expense claims, as these are likely to draw ATO scrutiny. The ATO employs advanced data analytics to detect anomalies based on factors such as employment type and financial investments. Excessive claims, particularly in areas like working from home, motor vehicle expenses, and rental property income, are likely to trigger alarms.

Key Areas Under ATO Scrutiny

  1. Work-Related Expenses: These are the most common deductions but also the most scrutinized. Proper documentation is crucial. This includes:

    • Hours Worked from Home: Maintain a timesheet or similar records.
    • Running Expenses: Keep evidence such as phone and electricity bills.
    • Depreciating Assets: Hold onto receipts and supporting documents for items like technology and office furniture.

    Working from home can complicate deductions. CPA Australia outlines two methods for claiming these expenses:

    • Fixed Rate Method: Claim a set rate of 67 cents per hour worked from home.
    • Actual Cost Method: Choose this method if it suits your individual circumstances better, but ensure you have the records to back it up.
  2. Motor Vehicle Expenses: For those using a vehicle for both business and private purposes, accurately recording and justifying the business-use percentage is essential. Use a logbook or diary to differentiate between business and private travel. Remember, commuting from home to work is considered private use unless it’s for a home-based business.

  3. Income from Rental Properties: The ATO will be closely examining claims related to rental properties. Key points include:

    • Repairs vs. Renovations: Only repairs due to wear and tear or tenant damage are tax-deductible. Improvements or asset replacements are capital expenses, eligible only for depreciation.
    • Mortgage Interest: Claiming the full interest is only permissible if there were no drawdowns for private purposes.
    • Gross Income Reporting: Ensure that the net income after expenses from rental properties is not mistakenly declared as gross income.
  4. Undeclared Income (Cryptocurrency Profits): The ATO is vigilant about undeclared income, particularly from cryptocurrency. Key points include:

    • Capital Gains Tax (CGT): Crypto assets held as investments are subject to CGT. Disposal, exchange, or swaps of these assets are CGT events, potentially resulting in capital gains or losses.
    • Record Keeping: Maintain thorough records of all transactions involving crypto assets to calculate capital gains or losses accurately. Holding a crypto asset for more than 12 months may make you eligible for the CGT discount.

Final Tips and Recommendations

  • Thoroughness and Accuracy: Ensure all income is properly declared and all deductions are justifiable and well-documented.
  • Digital Tools: Consider using digital tools and applications like myDeductions to streamline record-keeping and ensure accuracy.
  • Professional Advice: When in doubt, consult a tax professional to navigate complex deductions and avoid pitfalls.

By following these guidelines, taxpayers can help ensure their tax returns are accurate, compliant, and less likely to attract unwanted attention from the ATO.

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