The end of the financial year is creeping up on us folks, and as we’ve already discussed, tax season is likely to look a little different.
From extended hours working from home to the complexities of crypto investments, there’s a lot to keep in mind this year, and the ATO has been clear a “copy and paste” job of your 2019/20 claim will not cut it.
The latest news in this space is that the ATO has shared an update explaining the red flags they will be looking for in tax returns for 2020/21. Ray Jaramis, Head of Financial Wellness at Employment Hero shared his thoughts on the updates for added insight.
Here are the key points to keep in mind.
Tax returns will be different this year
Assistant Commissioner Tim Loh noted in a statement that the ATO is expecting a bump in claims this year, but that Aussies need to keep in mind that the shift in work culture means some traditional claims may no longer make sense.
“We know many people started working from home during COVID-19, so a jump in these claims is expected,” he said.
“But, if you are working at home, we would not expect to see claims for travelling between worksites, laundering uniforms or business trips.”
He stressed that the ATO will be paying close attention to deductions that are significantly higher than usual. Especially those that list both costs for working from home and travelling into the office.
“We will also look closely at anyone with significant working from home expenses, that maintains or increases their claims for things like car, travel or clothing expenses.”
“You can’t simply copy and paste previous year’s claims without evidence,” he said.
Car costs, laundry expenses and travel to work were some areas specifically named in the ATO’s statement. On travel into work specifically, the update read:
If an employee is working from home due to COVID-19, but needs to travel to their regular office sometimes, they cannot claim the cost of travel from home to work as these are still private expenses.
Jaramis shared that the ATO has “benchmarks and averages for certain claims,” the organisation will crosscheck “your claims with comparable claims from people in similar occupations”. Be honest, and “don’t surrender to the temptation of copying and pasting your previous year’s tax return,” he warned.
Most of us will have different claims this year because, simply, the world was remarkably different last year. Submitting a carbon copy of last year’s tax return [generally] won’t be a fair reflection on how you worked last year, so just don’t do it, Jaramis added.
This goes for everything from working style to crypto investments.
Hold onto your receipts
The above being said, the ATO is aware that many people may genuinely have a considerably different tax return this year. On this point, Loh simply stated that it’s important you keep receipts on hand and hold onto any relevant evidence surrounding unusual purchases.
It’s always worth chatting with your accountant if you’re unsure; they’ll be able to offer some guidance.
Car depreciation is another area that has been flagged in the lead up to tax time. On this, Jaramis shared that, “It’d be reasonable to think that most of us used our car less last year than we have in previous years. If you have used your car a lot, just make sure your records reflect it.”
Honest mistakes are not the end of the world, but be diligent
The statement from the ATO specified that genuine errors will be considered, but excessive claims will not be overlooked.
Loh shared that the ATO “will be sympathetic to legitimate mistakes where good faith efforts have been made. However, where we spot people deliberately claiming things they’re not entitled to, we will take firm action.”
On this point, Jaramis added that while your accountant is there to help you file your tax return, it’s important to understand that “using a tax accountant does not absolve you of all responsibility”.
“You can’t simply put your hands up and say ‘over to you, accountant’. You have a responsibility to know what you’re claiming and to confirm the details of your income tax return before they lodge it for you,” he said.
For some additional detail on what you can and can’t claim, check out the ATO’s occupation and industry guides here.
This article on the ATO and tax season has been updated since its original publish date with additional detail.