ATO Focus for 2023-24 FY:

Rental properties, work claims, & CGT

The ATO was especially concerned to ensure rental property owners understood how to correctly apportion loan interest expenses where part of the loan was used for private purposes.

“You can only claim interest on a loan used to purchase a rental property to earn rental income,” Mr Loh said. “If your loan also includes a private expense, such as for a new car or a trip to Bali, you can only claim an interest deduction for the portion relating to producing your rental income.”

In addition to rental properties, the ATO will be closely examining work-related expense claims. This area has always been a focus for the ATO, as it represents a significant portion of individual taxpayers' claims. However, with the increasing prevalence of remote work and the blurred lines between personal and business expenses, the ATO aims to ensure that taxpayers are correctly apportioning their claims and not inflating deductions. Taxpayers will need to keep detailed records, such as receipts and logbooks, to substantiate their claims and be prepared to provide evidence if requested by the ATO.

Capital gains tax (CGT) is another area where the ATO will be directing its attention. With the property market experiencing significant growth in recent years, there is an increased likelihood of taxpayers making gains on the sale of their assets. The ATO will be closely monitoring these transactions to ensure that taxpayers are correctly calculating their CGT liabilities and reporting them accurately. Taxpayers should ensure they are aware of the CGT rules, including the availability of any exemptions or concessions, to avoid unintended non-compliance.

Last year’s tax crackdown on crypto has morphed into a broader concern over CGT events for a wide range of assets.

The ATO said CGT applied to any disposal of shares, managed investments, properties and, of course, crypto.

“To ensure you are meeting your obligations and paying the right amount of tax, you need to calculate a capital gain or capital loss for each asset you dispose of unless an exemption applies,” the ATO said.

To support its focus on these areas, the ATO will be leveraging data-matching technology and advanced analytics to identify patterns and anomalies. This will allow them to target specific taxpayers or industries where noncompliance is more likely. The ATO will also be conducting education campaigns to inform taxpayers about their obligations and provide guidance on how to meet their tax obligations correctly.

Don’t fall into the trap of thinking we won’t notice if you sell an asset for a gain and don’t declare it,” Mr Loh said.

It is essential for taxpayers to be proactive in understanding their tax obligations, keeping accurate records, and seeking professional advice if needed. By staying informed and compliant, taxpayers can avoid potential audits, penalties, and the associated stress and financial implications. The ATO's focus on rental properties, work claims, and capital gains tax highlights the importance of accurate reporting and demonstrates their commitment to maintaining the integrity of Australia's tax system. Warren

(Source: https://www.ato.gov.au/Media-centre/Media-releases/ In-the-ATO-s-sights-this-tax-time/)

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