Get ready for tax time 2024

The end of the financial year is fast approaching and with that, tax time 2024 is kicking into gear. As it has in previous years, the ATO has recently flagged some primary areas where taxpayers frequently make mistakes on their tax returns. These include making incorrect claims of work-related expenses, making inflated rental property claims, and omitting certain kinds of income from tax returns. “These are the areas that people are most likely to get wrong”, ATO Assistant Commissioner Rob Thomson has said, “and while these mistakes are often genuine, sometimes they are deliberate. Take the time to get your return right.”

The ATO emphasises the importance of getting tax returns right the first time to avoid unnecessary complications from having to amend tax returns and attracting possible compliance activities. It also recommends that taxpayers not lodge their returns too early, and instead wait until the end of July or later to lodge, to avoid having their returns flagged as incorrect by the system.

For 2024, the ATO’s vigilance is particularly focused on incorrect claims of work-related expenses, inflated rental property claims, and the omission of income from tax returns. In the previous year, over eight million individuals claimed work-related deductions, with a significant number related to home office expenses. With the revision of the fixed rate method for calculating home office deductions, the ATO now requires more comprehensive records to substantiate claims.

Taxpayers are advised to keep detailed records, such as a calendar or diary, to log the actual hours worked from home and additional running costs incurred. These records should include copies of bills for electricity or internet services used while working from home. The ATO warns against simply replicating claims from the previous year without the proper documentation, as this could lead to disallowed deductions.

The ATO also reiterates the three golden rules for claiming any work-related expenses: you must have spent the money yourself without receiving reimbursement, the expense must be directly related to earning your income, and you must have a record, typically a receipt, to prove the expense.

Rental property owners are also under scrutiny this year, with data revealing that nine out of 10 are incorrectly completing their income tax returns. The ATO is paying close attention to deductions claimed for property repairs and maintenance, which are often mistaken for capital improvements. While immediate deductions are permissible for general repairs, such as replacing broken windows or damaged carpets, capital improvements like kitchen renovations are instead only deductible over time as capital works. The ATO encourages rental property owners to meticulously review your records before lodging your tax return, and to ensure that your claims are accurate and backed up with documentation. 

The last main area of focus is the timing of tax return lodgments. The ATO firmly warns taxpayers against lodging tax returns at the earliest possibility (on 1 July), as this can often lead to errors, particularly in failing to include all sources of income. According to the ATO, taxpayers who lodge early July will be doubling their chances of having their tax returns flagged as incorrect by the ATO. Most income information, such as interest from banks, dividend income and government payments, will be pre-filled in returns by the end of July, simplifying the process and reducing the likelihood of mistakes. Taxpayers are urged to check if their income statements are marked as “tax ready” in their myGov account before going ahead with lodgment.

Source: www.ato.gov.au/media-centre/ato-flags-3-key-focus-areas-for-this-tax-time 
www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/working-from-home-expenses 
www.ato.gov.au/media-centre/get-your-rental-right-this-tax-time