Investments and workers in the spotlight as ATO unveils targets

Millions of taxpayers will see their tax refunds shrink by up to $1500 this year, as the Australian Taxation Office sharpens its focus on dodgy claims in three key areas.

The Australian Taxation Office has warned of a swift crackdown on rental property investors, after finding the overwhelming majority are filing incorrect tax returns.

ATO assistant commissioner Tim Loh told The Australian regular reviews of property investors’ deductions have found “nine out of 10 returns are incorrect”.

“[It] is a really unacceptable rate,” Mr Loh said.

“We are really focused this year on making sure rental property owners and their registered tax agents understand their obligations, and we are going to be increasing our activities in this area.”

About 87 per cent of rental property owners use registered tax agents.

The warning came as the ATO unveiled its three big targets for tax time 2023, with lower refunds looming for millions and investors and workers face more scrutiny than ever before.

Along with rental property deductions, work-related expenses and capital gain tax make up the ATO’s three main focus areas, as it revealed registered tax agents have been dropping the ball.

“We are seeing a lot of the same mistakes being made in these areas,” Mr Loh said.

ATO assistant commissioner Tim Loh says work-related deductions changed. Picture: Supplied

Income-producing portions of residential properties – such as rooms on accommodation platforms including Airbnb or Stayz – could also create capital gains tax issues, the ATO warned.

It uses data-matching technology to spot capital gains on shares, property, cryptocurrencies and other assets.

“Don’t fall into the trap of thinking we won’t notice if you sell an asset for a gain and don’t declare it … you can’t hide anymore,” Mr Loh said.

Federal budget papers last week revealed Treasury aims to reclaim $9.1bn in unpaid tax over the next five years by cracking down on compliance.

Meanwhile, the ATO expects the end of the Low and Middle Income Tax Offset last year will lead to lower tax refunds and increased debts in 2023.

“LMITO was between $675 and $1500 last financial year, so we do expect refunds to come down by those amounts,” Mr Loh said.

“If taxpayers do find they receive an unexpected debt this tax time we do encourage them to engage with us really early, so we can support and help them with a tailored payment plan moving forward.”

Workers also must deal with changes to working-from-home deductions, with the Covid shortcut method ending last year and new changes from March 1 impacting other deductions and requiring more detailed records.

“Don’t be tempted to just copy and paste your prior year’s claims,” Mr Loh said. “We know a lot of people are working back in the office more compared to last year.

“I think we have been pretty transparent in communicating the changes to the working-from-home deduction methods.”

Tania Tonkin, director of dmca advisory, says record keeping is vital. Picture: Mark Brake

However, accounting groups have warned not everyone knows about them, and dmca advisory director Tania Tonkin said “I think a lot of people will be blindsided by it”.

“We have been telling clients from March 1 they have to keep a record of all hours worked from home,” she said.

“If you had a big claim last year and another big claim this year, they will want to look at it.”

Ms Tonkin said the ATO’s data-matching technology examined both investments and work-related expenses, and spotted when deductions seemed “out of kilter” with people’s jobs or claims history.

“Make sure your record keeping is up to scratch – you want to be able to prove the deductions you claim are valid,” she said.

Originally published as Investments and workers in the spotlight as ATO unveils targets