2018 ATO Target List for Audits
It’s that time of year when the ATO announces its individual target list for close scrutiny.
There are several key areas the ATO be considering for audits, including individuals who have made claims on Work Related Expenses, make extra income through the Shared Economy, and Investment in Crypto Currencies and Properties including Holiday Houses.
Work-related expenses claims have been on the increase so the fact this falls under scrutiny is not surprising. This year they’ll be looking particularly closely at:
- Claims for work-related clothing, dry cleaning and laundry expenses
- Deductions for home office use
- Mobile phone and internet costs
- Overtime meal claims
- Union fees and subscriptions
Individuals need to ensure their records are accurate and they understand what they can and can’t legally claim. Often proof is required (invoices, receipts, diary notes where you actually incurred the expenditure) and it was in fact business related.
Crypto Currency investments are also under scrutiny to ensure profits are declared, and any capital gains tax is correctly calculated.
If you operate in the shared economy, prepare to have your figures analysed to ensure your income and expenses are accurate. These include services such as:
- ride-sourcing – transporting passengers for a fare (such as Uber drivers)
- renting out a room or house for accommodation (such as Airbnb)
- renting out parking spaces
- providing skilled services – (Airtasker for example)
- renting out equipment, tools, sports equipment, musical instruments etc.
- completing odd jobs, errands, deliveries
With about 8% of the Australian population owning an investment property, the ATO has targeted deduction claims in relation to investment properties and holiday homes, including:
- Excessive interest expense claims, so ensure you are not claiming the borrowing costs on the family home as well as your rental property.
- Incorrect apportionment of rental income and expenses between owners, such as where deductions on a jointly owned property are claimed by the owner with the higher taxable income, rather than jointly.
- Holiday homes that are not genuinely available for rent. Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed. The ATO has access to third party data including Airbnb and Stays, so checking your claims is getting easier.
- Incorrect claims for newly purchased rental properties. The costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately. These costs are deductible instead over a number of years.
It’s simple to stay ahead – keep good records, and only claim what you can legitimately claim. If you can’t substantiate it, don’t claim it.
If you’re concerned about the possibility of an audit, audit insurance is available and needs to be purchased ahead of an audit being raised.
PJT can advise you on audit insurance, and on what can and can’t be claimed on your tax return. If you need advice, please reach out to your trusted PJT Accountant.