2024 ATO Key Focus Areas: 3 Areas To Watch This Tax Time

As Tax Time approaches, the ATO has announced it will be focusing on three commons errors made by taxpayers, and cracking down on Division 7A mistakes.

1. Rental Property Deductions

The ATO has identified rental property deductions as a focus area in 2024, in particular, claims that may have been inflated to offset increases in rental income. An example of this is significant repairs and maintenance claims, which could include capital expenses that are not immediately deductible. It is important to understand that general repairs and maintenance can be claimed as an immediate deduction, however, initial repairs or capital improvements, must be capitalised and depreciated.

Ensure all deduction claims on rental properties (including deprecation claims) are fully substantiated.

Consider obtaining a Quantity Surveyor report to maximise depreciation and capital works claims.

2. Work related Expenses

The ATO will be focusing on work from home deductions, particularly where claims are copied from a prior year, or evidence has not been kept. In 2023, the ATO revised the fixed rate method for calculating working from home deductions, expanding what is included, increasing the rate, and adjusting record-keeping requirements.

These changes are now fully in effect for this financial year, meaning you must have comprehensive records to substantiate your claims as you would for any other deduction.

Deductions will be disallowed if you are not eligible or you do not keep the right records.

There are 3 golden rules for claiming deductions:

• You must have spent the money yourself and were not reimbursed;
• The expense must directly relate to earning your income;
• You must have a record (usually a receipt) to prove it.

3. Under reporting income when lodging

The ATO warns against lodging your Tax Return too early, particularly where you have income from multiple sources, such as wages, government payments, interest from banks, dividends or distributions. By lodging in early July, you are at risk of your Tax Return being flagged as incorrect by the ATO.

Division 7A

The ATO will also be looking into some of the common mistakes made when it comes to Division 7A Loans:

• incorrect accounting for the use of company assets by shareholders and their associates;
• loans made without complying loan agreements; 
• reborrowing from the private company to make repayments on Division 7A loans;
• an incorrect benchmark interest rate applied on a Division 7A loan.

It is important that records are correct and annual checks are made to ensure:

• payments or loans are fully repaid of converted to a Division 7A complying loan agreement before the company’s lodgment day;
• minimum yearly repayments are made on complying loans from prior years by the end of the income year.

Further to this, the ATO remains focused on its digital approach for small businesses which will detect and minimise errors, and promote real-time reporting and payment.

For More information

For more information on the above focus areas or to reach out for our support, please feel free to contact your Archer Gowland Redshaw adviser on (07) 3002 2699 | info@agredshaw.com.au