Tax time: what you need to know

Tax time has rolled around once again, but this year there are some important things to keep in mind.

Tax time is upon us, and that means scouring emails and checking receipts to get our finances from the last year in order. It’s important to pay heed to the official advice from the ATO when completing your return so you don’t make any mistakes. 

This year, the Australian Taxation Office (ATO) said it will be focusing on four key areas:

  • record-keeping
  • work-related expenses
  • rental property income and deductions, and
  • capital gains from crypto assets, property, and shares.

“The ATO is targeting problem areas where we see people making mistakes,” said ATO Assistant Commissioner, Tim Loh.

“It’s important you rethink your claims and ensure you can satisfy the three golden rules.” 

The golden rules being:

  1. You must have spent the money yourself and weren’t reimbursed.
  2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income.
  3. You must have a record to prove it.

Loh recommends organising the income and deductions records you’ve kept throughout the year for a smoother tax time and to ensure you claim the deductions you are entitled to.

Lodging work-related expenses

Over the past two years, many of us have experienced working from home out of necessity. For some, it has become a permanent way of working, while for others, they may have changed to a hybrid working environment. A change in your working situation will change certain aspects of your return. 

“If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls,” Loh said.

Managing rental income and deductions

If you are a rental property owner, the ATO says you must state all income you’ve received from your rental – that includes short-term rental arrangements, insurance payouts and any rental bond money that you have retained.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance,” Loh said. 

Recording capital gains from assets including crypto

Now that many Australians are now buying, selling or exchanging digital coins and assets, the ATO says capital gains or losses from the sale of these assets need to be recorded at tax time. 

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages,” Loh said.

Tax time: what’s new this year

The ATO has also flagged some changes that may affect you this tax time, including support for those whose income has been impacted by COVID-19.

Also this year, the low and middle income tax offset (LMITO) has increased by $420 for 2021–22. This will increase the base amount to $675 and the maximum amount to $1,500.

From 1 July 2021, no capital gains tax (CGT) will apply when certain granny flat arrangements are created, varied or terminated. The CGT exemption only applies if all following conditions are met.

BNPL can be a useful tool to navigate tax time, allowing you to purchase what you need, when you need it, and pay it off in interest-free instalments. To find out more about how BNPL works, click here.