With only a few weeks before tax season, TaxSmart Cafe will be creating touchpoints and discussing this year’s “Australian Taxation Office (ATO) deduction Hit List” for individuals and small businesses. This is to create awareness and to avoid common mistakes.
As we all know, a lot has happened in the last 12 months and in particular, the ATO made changes to assist the public to cope with financial distress. However, some of the residents tend to get confused and even misinformed about it. With this, here are the most common tax return types for 2021 that ATO will examine a little more closely:
Work-related expenses
For you to have valid claims, you must meet the basic requirements such as:
- it was incurred and not reimbursed,
- expenses must be directly related to earning their income, and
- you must provide records to prove it.
For guidance, expenses should also have a connection with your occupation. If there was a private component, you can only claim a deduction for the work-related portion of the expense.
Working from home (WFH) claims
Due to the vast changes in the work environment, WFH is the most common setup for most of us. In claiming expenses, we recommend you to choose what method best suits you.
The options are:
- Shortcut method (an all-inclusive rate of 80 cents per work hour)
- Actual cost method, and
- Fixed-rate method (52 cents per work hour)
In addition, taxpayers cannot generally claim occupancy expenses unless their home office is considered to be a ‘place of business’.
Capital gains from cryptocurrency
A drastic increase in trading is reflected at the beginning of 2020. As per the last report, 100,000 taxpayers are reviewed and questioned with their previous lodgement. The organisation warned users that despite the anonymity, they do have the capacity to track and audit. Penalties may apply if gains are not declared at the end of the financial year.
Rental property deductions
Taxpayers can only claim rental property-related expenses for the timeframe that the property is rented or is available for rent. Take note that, if the owner used it for both private and income-producing purposes, appropriation should take place and only expenses relating to the income-producing purposes can be claimed. Strategically speaking, users can maximise the concept of negative gearing wherein they can deduct the full amount of expenses against the rental and other sources of income.
Take note, make sure to consult with your tax professional prior to acting on the content of this article since this is generic advice.
Follow TaxSmart Café on its social media pages for updates and upcoming events such as: “End of financial year tax tips for business owners”, “Legal tax minimisation for the health care profession” and ” Recipe for financial freedom”.
