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. Learn more with this blog post from Alexander Bright – leading tax accountants in Melbourne providing personal tax and business tax services.
Like last year, the ATO recommends that people wait until the end of July to lodge their tax returns and not rush to lodge at the beginning of July, as much of the prefill information has not yet been bedded down. In the past, it has been noted that individuals who lodge early forget to include 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 prefilled 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 also focus on capital gains from cryptocurrency assets. It should be noted, however, that with the recent crashing of cryptocurrency prices, individuals are more likely to have a capital loss.
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 who are unable to provide records to substantiate those claims will be subject to “firm action”. For those taxpayers working from home or in hybrid working arrangements who claim expenses related to that, the ATO has said it will be expecting a corresponding reduction in other expenses claimed such as car, clothing, parking, tolls, etc.
Currently, there are still three methods available to taxpayers to deduct working from home expenses. These are actual cost, fixed rate, and the short-cut method. Taxpayers should check their eligibility and work out the one that suits their 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 bond or short-term rental arrangements, need to be reported as income.
Lastly, the ATO will be keeping a close eye on those 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, but only against other capital gains.
If you need help this tax time, Alexander Bright can provide the tax services in Melbourne you need to maximise your deductions and lower your taxes. If you’re not sure what you can claim on your income tax returns, or whether you’ve made capital gains or losses from selling assets, we have the expertise to help you. Contact us today.
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