As ‘tax time’ approaches, the ATO has announced it will be focusing on three common errors made by taxpayers:
- Incorrectly claiming work-related expenses
- Inflating claims for rental properties
- Failing to include all income when lodging
Work-Related Expenses
In 2023, over 8 million people claimed work-related deductions, with around half relating to working from home. The ATO revised the fixed rate method for calculating working from home deductions, expanding what is included, increasing the rate, and adjusting record-keeping requirements.
These changes are now fully in effect for this financial year, meaning you must have comprehensive records to substantiate your claims as you would for any other deduction.
To use this method, you need records showing the actual number of hours worked from home (such as a calendar, diary, or spreadsheet) and the additional running costs incurred (such as electricity or internet bills).
“Deductions for working from home expenses can be calculated using either the actual cost or the fixed rate method. Keeping good records gives you the flexibility to use the method that works for you and claim the expenses you are entitled to,” said ATO Assistant Commissioner Rob Thomson.
“Copying and pasting your working from home claim from last year may be tempting, but this will likely result in us contacting you for an explanation. Your deductions will be disallowed if you’re not eligible or don’t keep the right records,” he added.
Remember the three golden rules for claiming any work-related expense:
- You must have spent the money yourself and were not reimbursed.
- The expense must directly relate to earning your income.
- You must have a record (usually a receipt) to prove it.
To assist you in keeping a record of the total number of hours worked from home using the revised fixed rate method of $0.67 per hour, we have prepared the 2024 Working from Home Diary Template.
Rental Properties
Rental properties remain a focus area for the ATO, with 9 out of 10 rental property owners getting their income tax returns wrong.
“This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,” Mr. Thomson said.
General repairs and maintenance on rental properties can be claimed as an immediate deduction. However, capital expenses (such as initial repairs on a newly purchased property and improvements during the time you hold the property) are not deductible as repairs or maintenance.
You can claim an immediate deduction for general repairs, like replacing damaged carpet or a broken window. However, capital improvements, such as installing a new kitchen, are only deductible over time as capital works.
The reporting of rental income and deductions can be complex. To enable us to assist you in claiming correctly, please provide full and complete records.
Get It Right – Wait to Lodge
The ATO is also advising against rushing to lodge your tax return on 1 July. If you have received income from multiple sources, wait until this is pre-filled in your tax return before lodging.
“We see many mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies, and private health insurers,” said Mr. Thomson.
For most people, this information will be automatically pre-filled in their tax return by the end of July, making the process smoother, saving time, and helping ensure accuracy.
“By lodging in early July, you double your chances of having your tax return flagged as incorrect by the ATO,” he added. “You can check if your employer has marked your income statement as ‘tax ready’ and if your pre-fill is available in myTax before lodging. This way, an amendment doesn’t need to be made later, which could result in unnecessary delays.”