Taxpayers are bracing for tougher ATO scrutiny as tax season begins

It’s that time of year when all taxpayers begin what will be an awkward but very important dance with the Australian Taxation Office as they complete and file their tax returns.

The most important thing to be aware of this year is that the somewhat forgiving attitude adopted by the ATO during the pandemic has been replaced by a much more dogged determination to make up for lost time and ensure tax returns are completed correctly .

The “good old days” of copying and pasting last year’s returns or messing up deductions are pretty useless now that the ATO has exceptionally good data matching capabilities, but that hasn’t bothered many people in the past refrain from testing their arms.

Up to 90% error rate

The ATO estimates that as many as nine in 10 landlords make mistakes or unlawfully claim extra rental deductions as part of their annual tax returns and they warn that these claims will be rigorously tested for accuracy this year.

ATO Deputy Commissioner Rob Thomson said a range of issues, including rental property deductions, unreliable work expense claims and undeclared income, will be investigated as officials begin the mammoth task of processing the 20 million tax returns filed expected to be submitted after July 1. .

Patience required – with an October deadline

One thing is very clear: you need to be patient but not lazy to complete the ATO dance correctly this year.

There’s no point in guessing what a deduction should be before you have all the information, and for real estate and stock market investors, that information often comes later in July and perhaps even later.

Similarly, information from employers, banks and health insurers is gradually being added to the online system, meaning those who file too early may actually face errors.

People working in the gig economy or investing in cryptocurrencies need to be particularly careful, as the data now matches very well with what were previously quite obscure sources of income and capital gains.

The ATO’s data matching program now includes more information from platforms such as Uber and Airbnb, insurance companies, cryptocurrency transactions, renewed car leases and rental bonds.

Last year alone, the ATO ‘amended’ almost half a million tax returns due to errors found in data matching.

Late payment penalties are increasing

While it’s good to wait until you know all the numbers exactly, there’s also an increasingly ‘tougher’ October tax return deadline, with many tax agents warning their clients of fines of up to $1,500 for late fees. refund.

Normally, those who don’t file their returns by October face an initial fine of $313, which could increase to $1,565 if the return is still not filed.

There is a little more flexibility if you file through an agent or accountant, who can arrange filing dates up to 2025 for their clients.

Pay attention to changes when working from home

One of the many changes this year concerns the more than 8 million taxpayers who claim a work-related deduction, about half of which relate to working from home.

There have been rule changes following the pandemic and taxpayers need to be very careful about having comprehensive data to back up anything they claim.

This data must show how many hours have been worked from home and what the additional costs are, including, for example, internet and energy bills.

That makes the practice of copying and pasting work from deduction claims from previous tax returns a very bad idea that will most likely get you in trouble, especially if the supporting paperwork isn’t thorough.

Under the revised flat rate method for remote working that came into effect last year, taxpayers can claim a flat hourly rate of 67 cents, which requires good record-keeping and has significantly reduced many home working claims from the highs were achieved during the pandemic.

What you should pay close attention to is that you cannot declare expenses such as mobile phone and internet bills separately, which is not allowed under the new method.

Other claims that will be subject to stricter scrutiny include work-related clothing, dry cleaning and laundry costs, as well as overtime, meal claims, union dues and subscriptions.

Some common mistakes made by landlords

One of the most common mistakes rental property owners make is trying to claim an immediate deduction for general repairs, when these works are capital improvements that must be deducted over time.

A new kitchen is a capital asset, but replacing a damaged floor or broken window can be claimed as a repair.