ATO Announces Enforcement of CGT, Rental Properties and Work Claims

Recent media reports have confirmed that the ATO’s priority targets now include CGT, rental property deductions and work-related expenses.

The ATO has declared that it will concentrate on capital gains tax, work-related costs, and rental property deductions in FY2024 in an effort to crack down on questionable payments as the end of the FY2023 financial year draws near.

According to the ATO’s analysis of income tax returns, 9 out of 10 landlords file their tax returns incorrectly. They frequently fail to include rental income or make errors with property-related deductions, such as overclaiming expenses or claiming for upgrades to private properties.

Tim Loh, Assistant Commissioner, stated that the ATO was “especially focused” on the regions where it was still discovering errors.

To address new areas of risk, such as “deductions linked to short-term rental properties to ensure they are actually available to rent,” the action would address “important areas of non-compliance.”

The ATO is especially concerned with interest costs and making sure landlords know how to properly allocate loan interest costs when a portion of the loan was utilised for private purposes (or the loan was re-financed with some private purpose).

“Remember, if your loan contains a private item, like a new car or a trip to Bali, you can only claim an interest deduction for the component linked to earning your rental revenue,” says the IRS. “You can only claim interest on a loan used to buy a rental property used to create rental income.”

ATO To Crack Down on False Property Claims

Accountants have also been informed that the ATO will be scrutinising landlords, investors, and clients who work from home more closely.

The following are some instances where mistakes are frequently made:

• Work expense claims that aren’t closely enough tied to a worker’s duties and responsibilities
• Deductions for working from home that are not justified by a daily log of hours worked
• Inaccurate allocation of interest costs for loans for rental property that are also utilised for personal purposes
• Capital upgrades that should not be considered deductible repairs
• Making false disclosures of capital gains via the sale of shares, real estate, managed investments, and cryptocurrency

At Success Accounting Group, we will give you the resources and tools you need to help you stay clear of these typical errors.

We will discuss a number of other significant events that have an impact on people, such as:

• The updated fixed-rate approach used by the ATO to claim deductions for working from home
• The ATO’s instructions for figuring out how much it costs to charge an electric car at home
• ATO tax residency rules for clients who are both inbound and outgoing
• NEW ATO recommendations for using the CGT rules when dealing with inherited homes

Contact us today to ensure you prepare your tax return with confidence.

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