Tax time 2022: ATO focus areas

Tax time 2022 is fast approaching, and this financial year, the ATO will again be focusing on a few key areas to ensure that individuals are doing the right thing and paying the right amount of tax. These key areas are considered by the ATO to be problem areas where individuals make the most mistakes.

Like last year, the ATO recommends that people wait until the end of July to lodge their tax returns, rather than rushing to lodge at the beginning of July. This is because much of the pre-fill information will become available later in the month, making it easier to ensure all income and deductions are reported correctly the first time, avoiding the need for amendments which can delay processing and refunds. In the past, it has been noted that individuals who lodge early often forget to include information about interest from banks, dividend income and payments from government agencies and private health insurers.

The ATO also reminds taxpayers that while it receives and matches information on rental income, foreign sourced income and capital gains, not all of that information will be pre-filled for individuals. Taxpayers will therefore need to ensure that all that information is included to avoid being caught up in ATO data-matching programs later on.

Some of the traditional areas that the ATO will be focusing on this year include record-keeping, work-related expenses and rental property income and deductions, as well as capital gains from property and shares. In addition, this year the ATO will focus on capital gains from cryptocurrency assets. It should be noted, however, that with recent crashes in cryptocurrency values, individuals are more likely to have related capital losses.

The ATO reminds taxpayers that any deductions that are claimed require substantiation, and those individuals who deliberately attempt to increase their refunds by falsifying records or are unable to provide evidence to substantiate their claims will be subject to “firm action”. For taxpayers who are working from home or in hybrid working arrangements and claim related expenses, the ATO has said it will be expecting a corresponding reduction in other expenses claimed, such as car, clothing, parking and tolls expenses.

Currently, there are still three methods available for taxpayers to deduct working from home expenses. These are actual cost, fixed rate and the all-inclusive shortcut method (80 cents per hour). Taxpayers should check their eligibility and work out which one that suits their own situation the best.

With the intense flooding experienced earlier this year, the ATO notes that some rental property owners may have insurance payouts related to their property. Any insurance payouts, along with other income received such as retained bonds or short-term rental arrangement income, need to be reported.

Lastly, the ATO will be keeping a close eye on individuals disposing of property, shares, and cryptocurrency, including non-fungible tokens (NFTs). Those with a capital gain need to include the gain in their tax return and pay tax on the gain at their marginal tax rates. Individuals who have recently sold out of cryptocurrency assets may have experienced a capital loss, which the ATO warns cannot be offset against other income such as salary and wages, and only against other capital gains.

Source: www.ato.gov.au/Media-centre/Media-releases/Four-priorities-for-the-ATO-this-tax-time/