As the financial year 2024 ends, it is essential to ensure that all financial records are accurately updated and reviewed.

The Australian Taxation Office (ATO) announced the three common errors that taxpayers being made in their tax returns.

Incorrectly claiming work-related expenses

Last year, the ATO revised the fixed rate method of calculating a working from home deduction to broaden what is included, increase the rate, and adjust the records taxpayers need to keep. These changes are now in full effect this financial year, which means taxpayers must have comprehensive records to substantiate their claims as they would for any other deduction.

To use this method, taxpayers need records that show the actual number of hours they worked from home (such as a calendar, diary or spreadsheet), and the additional running costs they incurred to claim a deduction (such as a copy of your electricity or internet bill).

There are three 'golden rules' for claiming a deduction for any work-related expense:

• taxpayers must have spent the money themseves and they were not reimbursed;

•  the expense must directly relate to earning their income; and

•   they must have a record (usually a receipt) to prove it.

Inflating claims for rental properties

The ATO's data shows that nine out of ten rental property owners are getting their income tax returns wrong.

Performing general repairs and maintenance on a rental property can be claimed as an immediate deduction. However, expenses which are capital in nature (such as initial repairs on a newly purchased property and any improvements during the time the taxpayer holds the property) are not deductible as repairs or maintenance.

As reporting rental income and deductions can be complex, many individual rental owners choose to use a registered tax agent to help them prepare their income tax returns.

Failing to include all income when lodging

The ATO is also warning taxpayers against rushing to lodge their tax return on 1 July.

Taxpayers who have received income from multiple sources need to wait until this is pre-filled in their tax return before lodging.

For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save time, and help taxpayers get their tax return right.

Ref: ATO website, Media Centre, 6 May 2024

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