3 Tax Deductions Under Closer Scrutiny by ATO in 2024

The end of the financial year (EOFY) is fast approaching and this year, the Australian Tax Office (ATO) has highlighted it will focus on specific tax deductions that will receive closer scrutiny. As an Australian homeowner, property investor, or first home buyer, it’s essential to understand what these focus areas are and how to avoid making errors. To help you prepare for EOFY, here are three tax deductions under ATO scrutiny in 2024.

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Work-related expenses

The ATO has identified work-related expenses as a significant area of concern, claiming there was an $8.7 billion shortfall between the tax individuals are expected to pay and the tax they are actually paying.

Expect the ATO to scrutinise:

Working from home expenses: With the introduction of the new 67 cents per hour fixed rate, the ATO will be checking these claims carefully. Ensure you have accurate records of all your working hours, such as timesheets or diaries.
Occupation costs: Deductions for rent, rates, and mortgage interest are only permitted if you're running a business from home.
Mobile phone and internet costs: Claiming the whole (or a substantial part) of your personal mobile bill as work-related when you’re already claiming the 67 cents per hour working from home rate - which includes an element for mobile phone costs – will be viewed by the ATO as double-dipping.
Work-related clothing and laundry: Only specific clothing, like uniforms, is tax deductible.
Motor vehicle claims: If you’re claiming the 85 cents per kilometre rate, ensure it accurately reflects your work-related travel.
Small expense claims: Claims under $300 without receipts must be genuine. The ATO will scrutinise these closely.

Tip: Keep detailed records and receipts for all work-related expenses to back-up your tax deduction claims.

Investment Properties

Another major area of focus for the ATO are deduction claims in relation to investment properties and holiday homes. In a series of recent audits, the ATO claims it found errors in 90% of returns reviewed.

Expect the ATO to scrutinise:

Interest expense claims: Only claim borrowing costs related to your rental property, not your personal home.
Income and expense apportionment: Correctly apportion income and expenses if the property is jointly owned.
Holiday homes: Only claim deductions for periods when the property is genuinely available for rent. Personal use periods cannot be claimed.
Newly purchased properties: Immediate claims for repair costs existing at the time of purchase are not allowed. These costs must be spread over several years.

Tip: Keep comprehensive records of all property-related expenses and rental income, and proof that the property was available for rent, such as listings or advertisements.

Sharing economy and cryptocurrency

The ATO believes that many people are not declaring their full income earned from the sharing economy, such as Uber, Airtasker, Airbnb, and Stayz or gains from investments in cryptocurrencies like Bitcoin.

Expect the ATO to scrutinise:

Income reporting: The ATO receives data from sharing economy platforms and will be matching this against your tax return.
Rental income: Make sure you declare all income from short-term rentals.
Capital gains tax (CGT): Gains from cryptocurrency investments are subject to CGT.
Data matching: The ATO is using data from cryptocurrency service providers to identify undeclared income.

Tip: Keep track of all income and expenses from sharing economy activities, and maintain detailed records of all cryptocurrency transactions to accurately report your gains or losses.

Preparing for ATO scrutiny

When it comes to tax deductions, the golden rule is, if you can’t substantiate it, you can’t claim it, so it’s essential you keep accurate records for all deductions. Know what you can and can’t claim, and if in doubt, get professional advice. Consider enlisting the services of a tax professional to ensure your tax claims are accurate and compliant with ATO regulations.

For more financial advice tailored to your unique situation and circumstances, contact Mortgage Express today and connect with a finance consultant near you.

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

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