Since the cost of leaving your front door — and even just sitting in your own house, to be honest — has gone through the roof, you might be hoping you’ll be able to claw a little back at tax time this year.
Not so fast, the Australian Taxation Office has said. The ATO has confirmed that they will once again be changing the way that people can claim deductions for working-from-home expenses for 2022/2023 tax returns.
Experts are warning Australians to expect lower tax returns this year after significant changes were made to the claims system that largely went unnoticed.
Each year, roughly $30 billion in work-related expenses are claimed by eight and a half million Aussies, an average of $3,000 per claim.
During the pandemic, with far more people working from home, tax return claims went through the roof as the ATO provided a ‘shortcut method’ of 80 cents per hour to work out WFH expenses. This was in addition to a fixed-rate method of 52 cents an hour.
The ATO has since been trying to wind back these claims as they suspect that there is a net gap of $9 billion between what taxes people are actually paying and what they should be paying.
Last year, they scrapped the 80 cents method, warning at the time that working from home expenses would be scrutinised more thoroughly and that anyone seeming to claim above the average may face a review or an audit.
Now, the ATO has also done away with the 52 cents-an-hour-method, replacing it with a revised 67-cent-per-hour calculation. While that rate is higher, it also limits what can actually be claimed.
Things like phone usage, internet, and electricity costs are still included in the revised rate. No longer included are assets like computers and home-office furniture as well as the depreciation of these assets.
Buy any equipment for work-related use this financial year? 💻🖨️ If an item cost you more than $300, you’ll need to work out its decline in value to claim a deduction. #TaxTip: This is known as depreciation. More info @ https://t.co/4NArXyBivY pic.twitter.com/e55l8tQ8Jo
— ato.gov.au (@ato_gov_au) March 9, 2023
In addition, the ATO will expect to see receipts, with workers expected to be able to to provide a record of hours worked from home. They have said that they will not accept estimates this time around.
The ATO’s Assistant Commissioner Tim Loh has said that people need to look carefully at what they’re claiming this year and be prepared to back up their deductions.
“First things first, make sure you are eligible to claim working from home expenses,” he said in a statement.
“To claim your working from home expenses, you must be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls. Also, you must incur additional expenses as a result of working from home”.
But WFH expenses aren’t the only area that the ATO has set its sights upon. Each year, the ATO selects certain areas of expense to crack down on and experts are predicting that claims made by investment property owners will also come under scrutiny.
Claiming interest on your rental property #mortgage? Reminder: If your loan covers both the rental property & something else, you can only claim the interest relating to the rental! 🚗🛥️
Find out how to calculate it correctly @ https://t.co/uPThb1tRpN pic.twitter.com/sVtX3G7RIL
— ato.gov.au (@ato_gov_au) April 18, 2023
In a recent series of audits, the ATO revealed that 90% of returns involving investment properties and holiday homes contained errors. A new data-matching deal with 17 of the country’s largest mortgage lenders will be giving them additional information to cross-check these claims.
H&R Block director of tax communications Mark Chapman has said he believes the ATO will be looking carefully at excessive interest expense claims, false expense claims, and holiday homes that are not “genuinely” available for rent.
“Periods of personal use can’t be claimed,” he warned.
“If you can’t substantiate it, you can’t claim it.”
Many of these areas of extra scrutiny are similar to previous years as the ATO attempts to correct this $9 billion discrepancy. Chapman also sees the ATO zeroing in on cryptocurrency investments, as they did last year.
There’s been a vinyl resurgence, but we’re more interested in your other records! If you’ve been selling or transacting in crypto, make #TaxTime smoother by checking out our tips @ https://t.co/7HTjqoq2I8 #Crypto #cryptocurrency pic.twitter.com/7LrVEORBzf
— ato.gov.au (@ato_gov_au) April 11, 2023
With more and more people investing in things like Bitcoin, the ATO has stepped up its data gathering and is now collecting records from Australian crypto providers.
“Data includes cryptocurrency purchase and sale information. The data will identify taxpayers who fail to disclose their income details correctly,” he said
“Given the downturn in crypto-markets this year, the ATO is likely to be on the look-out for taxpayers who have sold their crypto-assets at a loss and are claiming (for this year only) to be trading — as trading losses are far more flexible in the way they can be used than capital losses”.
Loh has previously warned that the ATO uses algorithms to detect when people might be trying to game the system.
“When it comes to hiding income from the ATO, this isn’t a game of Monopoly where you can roll the dice and avoid the income tax box,” he said.
“We get data from a range of sources, and we use our analytics tools to run our eyes over that data and look out for where people aren’t declaring their income or are overstating their deductions. One of the areas we focus on is lifestyle assets — whether that’s a boat or a luxury car or a piece of fine art.
“If someone isn’t declaring all their income in their tax return, then we’re going to be asking questions pretty quickly.”
While being reviewed or audited by the ATO is rare, it’s important you have all the documentation required to back up your claims, or you’ll have to pay some of your claims back.