The Australian Taxation Office (ATO) has stated that it will be taking a close look at three common errors being made by taxpayers which are incorrectly claiming work-related expenses, inflating claims for rental properties, and failing to include all income when lodging.
ATO Assistant Commissioner Rob Thomson said the ATO is focused on supporting taxpayers to get their lodgment right the first time.
“These are the areas that people are most likely to get wrong, and while these mistakes are often genuine, sometimes they are deliberate,” Thomson said. “Take the time to get your return right.”
Recent data found that in 2023 more than eight million people claimed a work-related deduction, with around half of those claimed a deduction related to working from home. The ATO recently revised the fixed rate method of calculating a working from home deduction to broaden what is included, increase the rate, and adjust the records you need to keep. These changes are now in full effect this financial year and taxpayers planning to file work-from-home deductions to prepared comprehensive records to substantiate their claims.
In particular, taxpayers need records that show the actual number of hours they worked from home (like a calendar, diary or spreadsheet) and the additional running costs you incurred to claim a deduction (like a copy of your electricity or internet bill).
“Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’,” Thomson said. “Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.”
Rental properties continue to remain in the ATO’s sights as data suggests that nine out of 10 rental property owners are getting their income tax returns wrong.
“We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this,” Thomson said. “We’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit.”
The ATO says that while performing general repairs and maintenance on your rental property can be claimed as an immediate deduction, expenses which are capital in nature such as initial repairs on a newly purchased property and any improvements during the time the property is held are not deductible as repairs or maintenance.
The ATO is also warning against rushing to lodge your tax return on 1 July. And taxpayers receiving income from multiple sources must wait until this is pre-filled in their tax return before lodging.
“We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,” Thomson explained. “For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and help you get your tax return right.”
The ATO also sternly warned that by lodging in early July, taxpayers are doubling their chances of having their tax returns flagged as incorrect by the agency.
“We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge,” Thomson cautioned. “You can check if your employer has marked your income statement as ‘tax ready’ as well as if your pre-fill is available in myTax before you lodge. That way, an amendment doesn’t need to be made later, which could result in unnecessary delays.”
