Rental property owners, gig economy workers and people trying to claim too much in work-from-home expenses will come under the Australian Taxation Office’s spotlight this year, a tax expert has revealed.
And if you’re a cryptocurrency enthusiast or get paid in cash, you should also watch out, said ‘Mr Taxman’ Adrian Raftery.
“You can run from the taxman, but you can’t hide,” he said.
These are the nine types of taxpayers who will have their tax lodgements examined a little more closely this year:
1. Rental property owners
The ATO has been scrutinising Aussies with rental properties in recent years, and 2021 won’t be any different.
“A common mistake is to claim initial repairs or capital improvements as an immediate deduction,” Raftery said. “Initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing a property are generally considered capital in nature and not deductible, even if you carried them out to make the property suitable for renting.”
And if you used your property or holiday homes for personal purposes, be sure to adjust your rental expenses.
2. Gig economy workers
The ATO gets income information from platforms like Airbnb, Uber, Airtasker, Stayz, Car Next Door, and more, said Raftery.
“If you advertise on the internet and customers/guests are paying electronically then expect the ATO to find out about it.”
If you get any income from these platforms, ignorance won’t be an excuse, Raftery warned.
3. People who get paid in cash
The rules are pretty black and white, said Raftery: any income you get, no matter how small or how you receive it, has to be declared as income in your tax return.
“Trying to dodge the tax office by not declaring the income will end in tears. You may think that the income is so little that the ATO won’t bother, but the cash economy is huge and is a perennial favourite on the taxman’s hit list,” he said.
Though COVID has forced more transactions to go digital, the ATO’s Black Economy Taskforce has a strong track record, and in 2019-20 uncovered $696 million in cash collections.
4. People over-claiming home office expenses
The ATO’s 80 cents-an-hour home expense shortcut may tempt some to become greedy, with as much as $1,440 up for grabs for someone working 37.5 hour weeks across 48 weeks.
“If you are using the temporary shortcut method it is an all-inclusive rate and you can’t claim for any other working from home running expenses,” Raftery said.
“If you use the fixed rate or actual cost methods then make sure you apportion expenses such as phone, computer & internet usage between work and private use.”
5. Cryptocurrency traders
In the last few months, the ATO has sent out “love letters” to tennis of thousands of Aussies asking why they haven’t declared income they receive from cryptocurrency providers, Raftery warned.
“Like shares, if you make a capital gain on crypto – regardless if you have converted back to cash or not – you should declare them in your return.”
And the latest crypto craze, non-fungible tokens (NFTs) will soon be on the ATO’s radar too, he added.
6. Aussies who earn income overseas
You’ll need to declare any and all income to the ATO, regardless of whether or not you earnt it in Australia.
“The ATO has tax treaties with 45 countries that allow them to exchange information about offshore income and transactions. Any data received is matched against Australian tax returns as residents need to declare worldwide income, not just Australian-sourced income,” said Raftery.
7. Aussies whose data doesn’t match up
Aussies should know that the ATO uses ‘data-matching’ technology – and has matched over 700 million transactions in the last year, with half a million taxpayers contacted over discrepancies in their income and returns through shares, crypto, and property.
“This process is quite lucrative as more than $1 billion is usually raised in tax revenue each year due to audit investigation by the ATO,” said Raftery.
8. Aussies claiming way more than their peers
The ATO compares deductions for workers with their counterparts in the same industry – so if yours is way higher than your peers, you’re on the ATO’s radar.
The rule is to always, always have evidence like receipts, a log book or diary entry to back up your claims. “Correctly apportion between private and work-related use,” Raftery added.
9. Aussies claiming much more than previous years
If you’re suddenly claiming way more than you did in former financial years, that’ll be a red flag to the ATO to review your lodgement again, the tax expert warned.
“Increased car expense claims without a change of employer nor occupation will trigger a potential review,” he said.
Remember that you can only claim a car expense if they drive between separate jobs on the same day, or drive to alternate workplaces for the same employer on the same day.
Again, be sure to keep records through logbooks and receipts, Raftery said.