Each year the ATO announces their focus areas … queue the drum roll please …. for the year ending 30 June 2023 it is:

• Capital Gains Tax
• Rental property deductions
• Work related expenses

Given recent trends in working from home and the ATO’s stated concern and ongoing focus on rental deductions, it’s no surprise that these areas will be a focus of the ATO compliance programs (along with a growing list). These compliance programs aim to raise revenue via collections and not by changing laws.

Let’s look at the latest focus areas in a little more detail:

Capital Gains Tax (CGT)

• CGT can apply when capital assets are disposed of, items like shares, managed investments or properties (main residence and investment properties) and crypto currencies.
• To ensure you are meeting your compliance obligations = paying the right amount of tax, you need to calculate a capital gain or capital loss for each asset you dispose of, unless an exemption applies.
• Your main residence is exempt from CGT – however if you have used your home to produce an income (such as running a business from home or as an Airbnb) then CGT may apply.

Rental property deductions

• The ATO carried out a review of income tax returns which showed nine out of ten investment property owners are getting their return wrong. In most cases, rental income is being left out or there are mistakes with property related deductions. This follows the recent change in laws as they apply to rental properties (eg the travel costs to inspect).
• The ATO have confirmed they are focusing on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses, where part of a loan was used for private purposes, or the property was not really available for rent (think coastal rental property where is used by the owners in peak summer season).

Work related expenses

• The ATO has streamlined how we can claim working from home expenses for the year ending 30 June 2023. Refer to our previous news story on this.
• To claim your working from home expenses as a deduction, you can use the actual cost, or the revised fixed rate method – as long as you meet record keeping and eligibility requirements.
• The actual (percentage of floor space) method where taxpayers have a dedicated workspace a percentage of their home expenses can be claimed with a 4-week diary of hours worked at home, as well as all receipts.
• A revised fixed rate method where taxpayers can claim a deduction of $0.67 per hour for each hour worked from home. In addition, taxpayers can claim an additional deduction for decline in the value of assets, utilities and home depreciation costs.

The Government have been very transparent – more money is being directed to the ATO for them to run more compliance programs – whilst the media spin is this is going to come from multi nationals the budget figures indicate that it’s individuals and small to medium businesses who are likely to bear the brunt. To help ensure you are ‘playing by the rules’ reach out to your ESV Engagement Partner.