ATO Hits Rental Property Income and Capital Gains this Tax Year

The Australian Taxation Office (ATO) has revealed the four major areas it will be focusing on this tax year, with rental property income/deductions and capital gains topping the list.

The Tax Office Assistant Commissioner, Tim Loh, said the ATO will be focusing this tax season on these four priority areas where it frequently discovers individuals making mistakes:

1. Rental property income and deductions;

2.Capital gains from crypto assets, property, and shares;

3. Record-keeping; and

4. Work-related expenses

Tim Loh said, “We know there are still some weeks left until tax time, but if you start organising the income and deductions records you’ve kept throughout the year, this will guarantee you a smoother tax time and ensure you claim the deductions you are entitled to.”

1. Rental property income and deductions

If you own a rental property, it is critical to include all the income you have earned from your rentals on your tax return-short-term rental arrangements, insurance payments, and rental bond funds that you keep.

Mr. Loh added, “We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually.”

Further, he explained that if the ATO discovers a discrepancy with your return, they may delay the processing of your refund by contacting you or your registered tax agent to fix it.

“We can also ask for supporting documentation for any claim that you make after your notice of assessment issues,” he adds.

2. Capital gains from crypto assets, property, and shares

If you sell a tangible asset, stock, or cryptocurrency, including non-fungible tokens (NFTs), in your financial year, you’ll have to calculate a capital gain or loss and report it on your tax return.

A capital gain or loss is the difference between the value at which you acquired an asset and its selling price when you sell it.

Mr. Loh pointed out that since many Australians are buying, trading, or exchanging digital coins and assets as reported in their data collection, it’s critical that people understand what this means for their tax obligations.

3. Record-keeping

The ATO has warned that this year it will take strong action against those who try to raise their refunds, fabricate records, or can’t back up their claims.

If you don’t have a deadline to fulfill your tax return, it may be preferable to wait until the end of July, when the ATO can pre-fill a lot of data for you automatically.

The ATO said, “we often see lots of mistakes in July as people rush to lodge their tax returns and forget to include interest from banks, dividend income, payments from other government agencies and private health insurers.”

However, not all data may be pre-populated for you, so be cautious and double-check.

“While we receive and match a lot of information on rental income, foreign-sourced income and capital gains events involving shares, crypto assets or property, we don’t pre-fill all of that information for you,” Mr Loh added.

4. Work-related expenses

Since the start of the pandemic, many people have switched to a hybrid working condition, with one-in-three Aussies claiming work-from-home expenses on their tax return last year.

If you’ve kept working from home, the ATO would expect to see a corresponding drop in car and clothing expenses as well as other work-related expenditures like parking and tolls.

Depending on your situation, you can take a deduction for your working from home expenses in one of three ways -the shortcut method (all-inclusive), fixed-rate method, or actual cost method- as long as you fulfill the requirements for each.

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