ATO’s Red Flags for the financial year 2021
Work-related expenses – Getting it right
Don’t forget the three golden rules:
- You have spent the money and were not reimbursed
- It was directly related to earning your income
- You have a record to prove it
Working from home claims (expectation from the ATO: to increase)
This financial year you have three options for working from home claims:
- Temporary shortcut method: 80 cents per work hour. This is all-inclusive and you can’t claim any other working from home running expenses.
- Fixed-rate method: 52 cents per work hour. This is used instead of calculating your actual expenses. You will need to separately calculate phone and internet usage, computer consumables, stationery and computer depreciation (apportioning for private use).
- Actual cost method: the actual work-related portion of all costs you incur as a result of working from home.
Car expenses – what you can claim (expectation from the ATO: to reduce)
You can only claim a deduction for the cost of using a car you own, lease or hire when you drive:
- between separate jobs on the same day
- to and from an alternative workplace for the same employer on the same day
- from home directly to an alternate workplace
- Normal trips between home and work. In limited circumstances, you can claim the cost of trips between home and work.
- You can’t claim a deduction for car expenses that have been salary sacrificed or where you have been reimbursed for these expenses.
- For motorcycles and other vehicles (that are not cars), you can’t claim work-related deductions under car expenses. However, you may be able to claim for work-related deductions under travel expenses. You can only claim your actual expenses for these vehicles. You must use the logbook method to show your work-related use.
RED FLAGS! Where the ATO puts its eye on?
High claims: the ATO compares claims across industries and where claims are unusually high
Exactly the same amount in claims: Where someone hasn’t adjusted their claims from the previous year
- Capital gains tax will be a focus area this year. In particular, cryptocurrency as well as traditional property and shares
- Collection of data from designated cryptocurrency service providers will be expanded as part of ATO’s ongoing data matching program
- It’s important to keep good records of all cryptocurrencies transactions to make tax time easier
Rental property claims – common mistakes
- Body corporate expenses: check what the amounts paid are for
- Repairs: was it a repair or capital expenditure
- Interest: did you refinance /redraw on your rental property loan, for private expenses such as holidays, or a new car? You can only claim the part of the interest that relates to the rental property
- Record keeping: keep records for income and expenses
- Capital gains or losses: have you sold the property? This could attract CGT and you should keep all records and provide them to your accountant
In 2020, ATO’s random audits found 77% of returns needed to be adjusted, with work-related expenses the most common adjustment, and rental claims closely following. It is strongly recommended to speak with your tax advisor to get professional assistance to get your claims right.
Disclaimer: The information contained in this article is general in nature and should not be taken as personal, professional or taxation advice. You ought to make your own inquiries and seek independent, professional advice before taking action or relying on any information in this article. As Tax legislation is subject to change, we cannot guarantee the timeliness of the information provided.