As the ATO gears up for tax time 2024, it has flagged three primary areas where taxpayers frequently make mistakes. It has emphasised the importance of getting tax returns right the first time to avoid unnecessary complications from having to amend tax returns and attracting possible compliance activities.

“These are the areas that people are most likely to get wrong, and while these mistakes are often genuine, sometimes they are deliberate. Take the time to get your return right.” – ATO Assistant Commissioner Rob Thomson

For 2024, the ATO’s vigilance is particularly focused on incorrect claims of work-related expenses, inflated rental property claims, and the omission of income on tax returns. In the previous year, over 8 million individuals claimed work-related deductions, with a significant number related to home office expenses. With the revision of the fixed rate method for calculating home office deductions, the ATO now requires more comprehensive records to substantiate claims.

Taxpayers are advised to keep detailed records, such as a calendar or diary, to log the actual hours worked from home and additional running costs incurred. These records should include copies of bills for electricity or internet services used while working from home. The ATO warns against simply replicating claims from the previous year without the proper documentation, as this could lead to disallowed deductions.

The ATO reiterates the three golden rules for claiming any work-related expenses: taxpayers must have spent the money themselves without reimbursement, the expense must be directly related to earning their income, and they must have a record, typically a receipt, to prove the expense.

Rental property owners are also under scrutiny this year, with data revealing that 9 out of 10 are incorrectly completing their income tax returns. The ATO is paying close attention to deductions claimed for repairs and maintenance, which are often mistaken for capital improvements. While immediate deductions are permissible for general repairs, such as replacing broken windows or damaged carpets, capital improvements like kitchen renovations are deductible over time as capital works. The ATO encourages rental property owners to meticulously review their records before lodging their tax returns, and to ensure that their claims are accurate.

The last area of focus for the ATO is the timing of tax return lodgments. It warns taxpayers against the lodging tax returns at the earliest possibility (ie 1 July), as this can often lead to errors, particularly in failing to include all sources of income. According to the ATO, taxpayer that lodge early July will be doubling their chances of having their tax returns flagged as incorrect by the ATO. Most income information, such as interest from banks, dividend income, and government payments, will be pre-filled in taxpayers’ returns by the end of July, simplifying the process and reducing the likelihood of mistakes. Taxpayers are urged to check if their income statements are marked as “tax ready” before lodgment.