The Australian Taxation Office (ATO) has announced the three key focus areas for this tax time:

• rental property deductions
• work-related expenses
• capital gains tax

These areas are where the ATO often see mistakes made.

Rental property deductions

Landlords listen up!

The ATO’s review of income tax return show 9 in 10 rental property owners are getting their return wrong. This can be in the form of rental income being left out, or mistakes being made with property related deductions – like overclaiming expenses or claiming for improvements.

The ATO is particularly focused on interest expenses and ensuring rental property owners understand how to correctly apportion loan interest expenses where part of the loan was used for private purposes (or the loan was re-financed with some private purpose).

The ATO has sophisticated data matching capabilities which include rental property-related data and has recently implemented a new residential investment property loans data matching program.

Work-related expenses

Do not be tempted to copy and paste your prior year’s claims. The ATO knows that Australians are working from home less as businesses move back into their offices.

This year, the ATO is particularly focused on ensuring taxpayers understand the changed to the working from home methods and are able to back up their claims.

To claim your working from home expenses as a deduction, you can use the actual cost, or the revised fixed rate method, so long as you meet the eligibility and record-keeping requirements.

Capital gains tax

Capital gains tax (CGT) comes into effect when you dispose of assets such as shares, crypto, managed investments or properties. To ensure you are meeting your obligations and paying the right amount of tax, you need to calculate a capital gain or capital loss for each asset you dispose of unless an exemption applies.

Generally, your main residence is exempt from CGT, however if you have used your home to produce income, such as renting out all or part of it through the sharing economy (Airbnb or Stayz), or running a business from home, then CGT may apply.

The ATO is reminding taxpayers of the importance of keeping records of the income-producing period and the portion of the property used to produce income to calculate your capital gain. If you used your property to earn income, and qualify for an exemption, make the election in your tax return.