It’s that time of year again… tax time.
But, there are a few things to keep in mind before you finalise your return.
The ATO has indicated that there are three areas where mistakes are commonly made. So, they will be taking a greater interest in these areas this tax season.
You want to ensure your tax return is accurate in every way possible, but it is especially important to get these three areas right as they will be heavily scrutinised.
Keep reading to find out about the three focus areas and what you can do to simplify your tax time processes in 2024.
The Three Focuses For Tax Time 2024
Whether intentionally made or not, the ATO often finds common errors on personal tax returns. They have announced that this year, they will be closely monitoring these three areas:
- Incorrect claiming of work-related expenses
- Inflated claims for rental properties
- Failure to include all income when lodging
The ATO Assistant Commissioner, Rob Thomson, has indicated that the ATO want to support taxpayers to lodge their 2024 tax returns correctly the first time.
He accepts that many times these errors are accidental, with people simply getting their calculations wrong or making genuine oversights. However, sometimes the errors appear to be more deliberate, so he wants taxpayers to take the time to get their returns right when they are initially lodged.
Let’s look into these three areas in more detail and how you can avoid making mistakes.
1: Incorrect Claiming of Work-Related Expenses
It is possible to claim work-related expenses you have incurred. However, in order to claim a deduction for these expenses, you must meet 3 specific criteria:
- You actually spent the money and weren’t reimbursed
- The expense is directly related to earning your income
- You have a record of the expense, like a receipt
These three stipulations are the first area that taxpayers can get tripped up, resulting in errors in their tax returns. So, you first need to keep that in mind when navigating tax time this year.
The second area for potential error is the actual calculation of the deductions. This is particularly true if your tax return contains work-from-home related costs. Last year, the ATO revised the fixed rate method for calculating work-from-home deductions and it is resulting in some confusion.
It now means you need comprehensive records to back up your calculations, such as calendar records and copies of your utility bills. This is regardless of whether you use the fixed or actual cost calculation method.
The ATO has been quite explicit about not simply copying and pasting your claim from last year. While your expenses may be similar to the previous year, they may be disallowed if you do not have the correct records to back up your 2024 calculations.
You can stay on top of this throughout the year by retaining copies of all your work-related receipts and bills. You may even choose to maintain a spreadsheet or record the figures electronically in an accounting system. Alternatively, you can work with us and we will tell you exactly what records you need to supply and how to ensure your calculations are correct.
2: Inflated Claims For Rental Properties
Did you know that 9 out of 10 rental property owners are getting their income tax returns wrong? It’s no wonder that the ATO is zeroing in on rental properties with this information at hand!
Many of the inaccuracies are due to property owners making mistakes when claiming deductions for repairs and maintenance. Often there is confusion over what can be claimed as an immediate deduction and what must be considered a capital improvement, becoming deductible over time as capital works.
General repairs, like the replacement of damaged carpet or a broken window, can be claimed as an immediate deduction. However, the removal and upgrade of an entire kitchen would be considered capital works as it adds value to the property and is not technically a repair.
Because of this past confusion, the ATO is strongly encouraging property owners to carefully review their records before lodging their 2024 return. This is to ensure all expenses are correctly recorded and that you are not suspected of inflating repair costs to offset increases in rental income for a greater tax benefit.
As another preventative measure, the ATO also suggests utilising the skills of a registered tax agent, like your friends here at Cadenze Partners, to help you navigate the complexities of reporting rental income and deductions. Thomson suggests, ‘Ensuring you provide full and complete records to your registered tax agent allows them to prepare your tax return correctly, so you claim everything you’re entitled to and nothing that you’re not.’
If you are concerned about correctly calculating your rental income and deductions, then reach out to the team here at Cadenze Partners for expert advice and support.
3: Failure To Include All Income
Being proactive is generally a good thing. Unless you are being too proactive with submitting your tax return. While you are able to lodge your 2024 return from 1 July, don’t rush to do it as soon as humanly possible.
Rather, you should wait until all of your income is documented before submission. This is especially important if you receive income from multiple sources – such as interest from banks, dividend income, payments from government agencies or private health insurance.
Generally, this information will be automatically pre-filled in your tax return by the end of July. So, it is advised to wait until that time before lodging your tax return otherwise you run the risk of it being incorrect as not all of your income would be included at the time of lodgement.
If any income is missed, your tax return would be flagged as incorrect and you would need to submit an amendment. This obviously creates extra work for everyone involved and could result in unnecessary delays.
Working with a tax agent, like the respected team here at Cadenze Partners , can help to ensure all of your income is captured in the first place and can reduce the chance of an incorrect tax return.
Making Tax Time Easier For You
The best way to make tax time easier on yourself is to stay on top of your records throughout the year. That way, when tax time does roll around, you will have all the information ready to go.
Our experienced and helpful team of tax experts can assist you with this process. Maintaining records and tax calculations are our specialties, so we make the exercise of lodging your tax return as simple as possible.
Get in touch with our team now for more information on how we can take care of your tax return.