ATO focuses tax returns

ATO Tax Focus Areas for Tax Returns FY23

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Each year the ATO has a few key areas of focus that prioritise common mistake areas. This financial year’s three areas of focus are:

  • rental property deductions
  • work-related expense
  • capital gains tax

To maximise your claims and reduce the likelihood of an ATO audit or adjustments later, let’s deep dive into what they’re looking into:

Rental property deductions

The ATO’s review of income tax returns show 9 in 10 rental property owners (rental and holiday rental) are getting their return wrong, and often sees rental income being left out, or mistakes being made with property related deductions – like over-claiming expenses or claiming for improvements to private properties.

If you have an investment property that isn’t rented or available for rent, such as a holiday home, then you generally can’t claim deductions because it doesn’t generate rental income.

The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).

The ATO has sophisticated data matching capabilities which include rental property-related data and has recently implemented a new residential investments property loans data matching program.

To read more about record keeping specific to investment properties our news post on rental property deductions and record keeping might help.

Work-related expenses

There have been changes this year to how working from home deductions are calculated. As a result understanding the changes to how working from home is calculated and also ensuring you can back up your claim is important.

Provided the eligibility criteria and record-keeping requirements, to claim working from home expenses as a deduction, you can use the actual cost method or the revised fixed rate method.

Capital Gains Tax

Capital gains tax (CGT) comes into effect when. you dispose of an asset such as shares, investments, properties, crypto or managed investments. The capital gain falls in into the tax year that the assets have been sold.

The ATO has elaborate data-matching capabilities so accurately disclosing any disposal of assets is as important as ever.

If you have any queries or questions in regards to your tax return and any of the information above don’t hesitate to get in contact with us at STS Accounting..