Tax focus areas for 2022
Tax time 2022 is fast approaching, and this financial year, the ATO will again be focusing on a few key areas to ensure that individuals are doing the right thing and paying the right amount of tax.
These key areas are considered by the ATO to be problem areas where individuals make the most mistakes.
Like last year, the ATO recommends that people wait until the end of July to lodge their tax returns and not rush to lodge at the beginning of July.
Pre-fill data
This is because much of the prefill information has not been migrated until the end of July. In the past, it has been noted that individuals who lodge early forget to include interest from banks, dividend income and payments from government agencies and private health insurers.
“You can check if your employer has marked your income statement as ‘tax ready’ as well as if your pre-fill is available in myTax before you lodge. That way, an amendment doesn’t need to be made later, which could result in delays to your refund”, according to Mr Tim Loh, ATO Assistant Commissioner.
The ATO also reminds taxpayers that while it receives and matches information on rental income, foreign sourced income and capital gains, not all of that information will be prefilled for individuals. Taxpayers will therefore need to ensure that all such information is included to avoid being caught up in ATO data-matching programs later on.
Focus areas for tax time 2022
Some of the traditional areas that the ATO will be focusing on this year include:
- record-keeping
- work-related expenses
- rental property income and deductions
- capital gains from property and shares
In addition, this year the ATO will also focus on capital gains from cryptocurrency assets. It should be noted, however, that with the recent crashing of cryptocurrency prices individuals are more likely to have a capital loss.
Substantiating your tax claims with evidence
The ATO reminds taxpayers that any deductions that are claimed require substantiation. Individuals who deliberately attempt to increase their refunds by falsifying records or who are unable to provide records to substantiate their claims will be subject to “firm action”. For those taxpayers working from home or in hybrid working arrangements and who claim expenses relating to that activity, the ATO has said it will be expecting a corresponding reduction in other expenses claimed such as car, clothing, parking, tolls etc.
Currently, there are still 3 methods available for taxpayers to deduct working from home expenses. These are actual cost, fixed rate, and the short-cut method. Taxpayers should check their eligibility and work out the one that suits their situation the best.
Insurance payouts
With the intense flooding experienced earlier this year, the ATO notes that some rental property owners may have insurance payouts related to their property. Any insurance payouts along with other income received such as retained bond, or short-term rental arrangements need to be reported as income.
Capital gains
Lastly, the ATO will be keeping a close eye on individuals who have disposed of property, shares, and cryptocurrency, including non-fungible tokens (NFTs). Taxpayers with a capital gain need to include the gain in their tax return and pay tax on the gain at their marginal tax rate. Individuals who have recently sold cryptocurrency assets may have experienced a capital loss, which the ATO warns can only be offset against capital gains and cannot be claimed against other income such as salary and wages.
Need help this tax time?
If you need help this tax time, we can help you maximise your deductions and lower your taxes. If you’re not sure what you can claim, or whether you’ve made capital gains or losses from selling assets, we have the expertise to help you. Contact us today.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.