3 Mistakes That Could Get Your Tax Return Flagged by the ATO This Year

The end of the financial year is coming up and tax season is likely to look a little different this year. From the shifting nature of working from home claims to superannuation changes, there’s a lot to keep in mind in 2024, and a “copy and paste” job of your last tax claim will not cut it.

Here are the key points to keep in mind for the 2024 tax season.

What is the ATO cracking down on this year?

Last year, the Australian Taxation Office (ATO) kept a close eye on things like rental property deductions, work-related expenses and Capital Gains tax. Will it be a similar story this year? On May 6, the ATO announced its priorities for tax time in 2024, and this year, they are as follows:

Work-related expenses

According to the ATO, over 8 million people claimed a work-related deduction on their tax returns last year, so it’s something the organisation is going to be watching closely in 2024. Last year, the ATO also revised its fixed rate method for those working from home and in 2024, that is fully in effect.

To use this method, you need records that prove the actual number of hours that you worked from home and the running costs that you incurred to claim a deduction (like a copy of a utility bill).

The ATO took a moment to point out its three golden rules for claiming a work-related expense

1. you must have spent the money yourself and weren’t reimbursed,
2. the expense must directly relate to earning your income, and
3. you must have a record (usually a receipt) to prove it.

Rental Properties

Rental properties are a priority for the ATO this year as it claims that 9 out of 10 rental property owners are getting their tax returns wrong.

“We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this. This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,” ATO Assistant Commissioner Rob Thomson said.

Some things that owners should bear in mind is that general repairs and maintenance can be claimed as an immediate deduction, however things like initial repairs on a newly purchased property or any improvements during the time you hold the property (like renovations or major improvements) are not deductible.

Additionally, H&R Block’s Director of Tax Communications, Mark Chapman, said property owners should bear these things in mind at tax time:

• Excessive interest expense claims, such as where property owners have tried to claim borrowing costs on the family home as well as their rental property. 
• Incorrect apportionment of rental income and expenses between owners, such as where deductions on a jointly owned property are claimed by the owner with the higher taxable income, rather than jointly.
• Holiday homes that are not genuinely available for rent. Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed. 
• Incorrect claims for newly purchased rental properties. The costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately. These costs are deductible instead over a number of years.

Chapman recommends that, to avoid being called out for any of the above, property owners keep good records.

Rushed lodgements

It can be tempting lodge your tax return as soon as possible so you can see that (hopfully) sweet return in your bank account as soon as possible. However, the ATO advises against lodging too quickly as this can have your return flagged as incorrect.

“We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,” said Mr Thomson.

You don’t have to wait too long, however, as the ATO says this is usually pre-filled by the end of July. This can be double checked in your account by ensuring that all your income tax statements are marked as ‘tax ready’.

For additional details on what you can and can’t claim, check out the ATO’s occupation and industry guides here. Keep up to date with more info this tax time here.

Lead Image Credit: ATO/Paramount Pictures