If you do this at tax time, you’re definitely on the ATO’s radar

With tax time upon us, there are major four huge mistakes Aussies are making that could mean you are on the ATO’s radar.

Tax time is upon us, which means many Aussies are scrambling to get their finances sorted.

At-home money managers should note however that the Australian Tax Office (ATO) is unhappy with a $9 billion tax gap and will be zeroing in on some trouble spots.

Below are four key areas you need to keep an eye on, or risk an audit from the ATO.

Work related expenses

Director of tax communications at H&R Block, Mark Chapman says most of the tax gap is people incorrectly claiming work related expenses.

“It’s important for tax payers to remember the golden rules – only claim something actually incurred for work purposes, have full substantiation (or evidence), and don’t claim anything you were reimbursed for by your employer.

“If you can tick off all of those boxes then you can claim it.”

Working from home deductions have also become a minefield because many people don’t keep full records or timesheets.

“The ATO is looking at these claims very closely,” Chapman said. “Unfortunately many don’t have substantiation and get their claims knocked down.”

Ensure you’re aware of work-related expenses you can claim. Picture: iStock

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Rental property risks

After work related expenses, property is seen as the largest contributor to the tax gap.

“The ATO has looked at tax returns from property investors and noted that up to 90 per cent of them are wrong,” Chapman said.

“We don’t know if it’s a dollar or two incorrect or thousands of dollars. But it does indicate that the ATO is looking closely at people who have a rental property.”

Chapman says the pitfall here is people simply not knowing that rental income is taxable and not declaring it.

Tax partner at Pitcher Partners in Melbourne, Daniel Burt agrees that rental properties are on the ATO’s radar as the risks have increased.

The issue of the ATO focusing on holiday homes is not new,” Burt said. “But what has changed is the prevalence of airbnb and being able to use an online platform to make a second home available for a short period of time.

“The risk may be higher with a less formal arrangement that has less documentation.”

To keep things in order, Burt says records need to be kept for the period of rent, income received and for all expenses.

“If the property is not genuinely available to rent for the entire year, the ATO expects some sort of apportionment (division). They’re looking to see if it’s reasonable based on property use.”

After work related expenses, property is seen as the largest contributor to the tax gap. Picture: Supplied

Sharing economy and crypto

Those moonlighting with Uber, Airtasker or similar should take note – the sharing economy is also setting off alarm bells at the ATO.

Chapman says if you work in these areas and don’t properly declare your income, you’re lining yourself up for an ATO audit.

“The ATO knows who is working in the shared economy and expects to see that disclosed,” he said.

Cryptocurrency investors better stay sharp too.

“Similarly, the ATO does have information about who invests through crypto currency exchanges,” Chapman said.

Don’t disclose and you’ll typically get a “please explain letter” from the ATO, he warns.

Another area to check is general investing to see if any of your shares have gone down, which is called an unrealised loss, Burt says.

Such a loss can be used to reduce your capital gains. This matters because your net capital gain is added to your taxable income, which is then taxed at the appropriate marginal tax rate.

“So there’s an opportunity to sell those shares and generate the loss before the end of the financial year,” Burt said.

In short, this means you can offset your gains and losses in the same income year to come to a net amount.

Cryptocurrency investors better stay sharp. Picture: Dale De La Rey/AFP

Super contributions

Burt also recommends people look at their super more closely ahead of tax time.

Under current tax rules you can claim up to $30,000 of deductions during the financial year for concessional contributions.

This means if an employer puts in $18,000, you can add $12,000 of concessional contributions and claim a tax deduction, says Burt.

“If you have surplus cash from selling some assets or an inheritance, for example, you can reduce your tax liability by making these additional voluntary super contributions,” Burt said.

“But act quickly because we’ve only got a week before the end of financial year.”

Jean-Paul Pelosi is an experienced journalist and editor in the finance sector

Originally published as If you do this at tax time, you’re definitely on the ATO’s radar