The Australian Taxation Office (ATO) are focusing on four key areas this 2022 tax season.
- Gains from crypto, property, and shares;
- Rental property income and deductions;
- Work-related expenses; and
- Record keeping.
The main culprits are still there, being work related deductions and rental property claims. However, a new one on the list is capital gains from crypto activity.
Gains from Crypto, Property, and Shares
Our recent article ‘Do you know how your Cryptocurrency is taxed?‘ outlines some of the tax implications associated with crypto transactions.
What you may not be aware of is that the ATO have a number of data collection processes in place that allow them to identify taxpayers that have crypto activity to declare. They receive information from share registries and crypto asset exchanges and have had a cryptocurrency data-matching program operating since April 2019.
As such, it is important that you review your crypto activity and ensure you disclose this activity in your tax return. Our article provides some tips on how you can go about this and whilst we love a good spreadsheet, unfortunately, it’s not a good solution to track and quantify your crypto gains and losses.
Gains realised from shares and property disposals are also at the top of the ATO’s list this year. The ATO has data matching programs in place with the various Revenue Offices to track property ownership changes.
Our Tips on dealing with Capital Gains:
- Generally, the gain will be realised on the contract date and not the settlement date so make sure you declare it in the right financial year;
- Make sure you capture all costs incurred to help reduce any capital gain you make on the sale of your asset. This can include purchase costs such as brokerage on shares and stamp duty and legals on property purchases, selling costs such as commissions and legal fees, and holding costs over the ownership period. Record keeping is key to this and consistent compiling of this information over the ownership period will be of benefit when it comes time to sell and quantify your gain;
- Check if you are eligible for any concessions or discounts. Have you held the asset for more than 12 months? If so, you may be eligible for the general 50% discount. Is the asset used in a business connected with you? You may be eligible for the small business CGT concessions.
- Seek assistance from us! We are specialists in the field of capital gains tax and can help you quantify your capital gain accurately and discuss applicable strategies to help maximise your after tax position.
Rental Property Income and Deductions
You must declare all income you receive from your rental property. This includes short-term rental arrangements, insurance payouts, and rental bonds you have retained.
To claim deductions relating to your rental property, the property must be rented or available for rent. Things that show your rental property is available for rent include:
- having a tenant renting the property, or making a genuine effort to tenant the property through advertising to a broad exposure of potential tenants;
- not limiting opportunities through conditions that are restrictive.
If your property is not rented or available for rent for a full income year then you must apportion your deductions and only claim costs you incurred whilst the property was rented/available for rent.
Rental expenses are generally grouped into three categories:
Category 1: Costs you can claim a deduction for now
These types of costs include interest on loans, council rates, repairs and maintenance, insurance, agent commissions, etc.
Category 2: Costs you can claim a deduction for over several years
These include capital works, borrowing expenses on loans, and decline in value of depreciating assets.
Category 3: Costs you can’t claim a deduction for
These include personal expenses, costs you don’t pay for (e.g. utilities if the tenant pays), and purchase of second-hand (or used) depreciating assets.
ATO reviews in this area are becoming more frequent and the one thing that helps with this is good record keeping of your rental activity. Good record keeping leads to accurate disclosure of income and expenses and less risk of any hold ups with the ATO should they request information before finalising your tax return. Having support regarding the status of your rental property, receipts for costs you have incurred and ensuring you only claim what you are entitled to all help when preparing your income tax return this financial year.
The ATO have published a guide named Rental Properties 2022 which you may find useful in understanding how to treat your rental activity.
The ATO has 3 golden rules for claiming work-related expenses:
- You must have spent the money yourself and you weren’t reimbursed;
- The expenses must directly relate to earning your income; and
- You must have a record to prove it (usually a receipt).
With the hybrid working environment that many of us now see as a normal way of life, the key area of focus the ATO has in this space is working from home expenses. Our article ‘Working from Home Taxation Deductions 2022‘ outlines the various methods you can consider when claiming your work from home deductions.
You can only claim the work portion of any expenses you incur that have work and private use components. You should keep a record as to how these costs have been apportioned.
The ATO have published a number of occupation and industry specific guides to share information about income, allowances, and deductions you can claim. These guides are tailored to address common claims and errors in your particular occupation or industry, and you can access them here.
Once again, the key to deductions is ensuring that you keep proper records to support the claims you are making should the ATO wish to review them.
A common theme throughout this 2022 hit list is the need for good record keeping. The ATO have made it quite clear that they will take firm action if they find taxpayers deliberately trying to increase their refund, falsify records or not have the ability to substantiate their claims.
To reduce your risk of an ATO audit, we recommend that you:
- Keep good records;
- Declare all of your income;
- Only claim what you are eligible to claim; and
- Contact us to assist you. Whilst this won’t mitigate the risk of an ATO review completely, it gives the ATO a level of confidence that the information being lodged is accurate and substantiated.
Get in touch
We have a team of taxation specialists available to support you with all your taxation obligations. To discover how we can help, contact us on 03 5221 6399 or firstname.lastname@example.org.
This article was written by Director Kylie McEwan.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.