14 June 2023

As the end of the financial year approaches, it's important for business owners and taxpayers to be aware of the Australian Taxation Office's (ATO) key focus areas this financial year. Understanding these focus areas can help keep you on the right side of the ATO and minimise the risk of audits or penalties.

In this article, we will discuss the ATO's three primary focus areas, along with other important changes that taxpayers and businesses should be aware of.

1. Rental property deductions

The ATO has emphasised its focus on rental property deductions. It is crucial for rental property owners to accurately apportion loan interest expenses, especially when part of the loan was used for private purposes. To avoid complications, it is recommended that landlords keep detailed records and seek professional advice to correctly claim their deductions.

2. Work-related expenses

Working from home (WFH) deductions have been an area of focus for the ATO, and this year, it's important to pay close attention to the eligibility and record-keeping requirements. Unlike previous years, the 'Shortcut method' (claiming $0.80 per hour worked from home) is no longer available. Instead, taxpayers can choose between the 'Fixed rate method' (claiming $0.67 per work hour) or the 'Actual cost method' for claiming WFH expenses. It is essential to maintain accurate records, including a logbook of days worked from home, to substantiate these claims.

3. Capital gains tax

The ATO wants to ensure taxpayers are considering all assets when calculating capital gains tax (CGT). If you have used your home to produce income, such as renting out all or part of it through a platform like Airbnb, or running a business from home, then you must keep records of the income-producing period and the portion of the property used to generate income. These records will play a vital role in accurately calculating capital gains and minimising the risk of errors or oversights.

Other important changes for taxpayers and businesses

In addition to the ATO's key focus areas, there are several other important changes that taxpayers and businesses should be aware of as they prepare for end of financial year.

Low and Middle Income Tax Offset

The Low and Middle Income Tax Offset (LMITO) ended on 30 June 2022 and will not be available for the 2022–23 income year. Introduced by the former Coalition government, the LMITO was initially designed to only be paid in the 2019-20 financial year but was extended twice due to the pandemic.

Removal of the Self-Education Expenses Threshold

Before 1 July 2022, taxpayers were required to reduce their allowable work-related self-education expenses by $250 to calculate their deductions. However, starting from the 2022–23 income year, the $250 non-deductible threshold has been removed. This means that taxpayers no longer need to adjust their deductions by $250 when claiming self-education expenses. It is still important to maintain records of your deductible self-education expenses, but you no longer need to keep records of non-deductible self-education expenses that were previously offset against the $250 threshold. These changes also apply to the Fringe Benefits Tax (FBT) year starting on 1 April 2023.

Cryptocurrency investments

Regardless of whether your cryptocurrency transactions resulted in a gain or a loss, it is mandatory to report them in your tax returns.

When it comes to reporting cryptocurrency gains and losses, it is crucial to keep accurate and detailed records of all transactions. This includes information such as the date and time of each transaction, the nature of the transaction (buying, selling, or swapping), the value of the cryptocurrency at the time of the transaction, and any associated fees or charges.

It is worth noting that the ATO has been increasing its data-matching capabilities, which means they have access to information from cryptocurrency exchanges and other sources. This allows them to cross-reference the information provided in tax returns with the actual transactions that have taken place.

Navigate tax time with confidence

As tax time approaches, Findex can help you stay informed about the ATO's focus areas and other important changes that can impact your tax obligations. From rental property deductions to work-related expenses and capital gains tax, Findex has more than 35 years of experience helping 250,000 clients across Australia and New Zealand to navigate tax complexities effectively.

With their extensive knowledge and experience, our Accounting and Business Advisory team provides personalised guidance tailored to your specific circumstances. Get in touch to see how we can help you maximise your tax benefits, minimise risks, and take the stress out of tax time.

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex Group Limited.