Taxpayers are reminded not to make the mistake of ‘double dipping’ on deductions (that is, claiming expenses twice) in their tax return this year.
Some of the ‘double dipping’ mistakes commonly made relate to the following deductions:
Working from home expenses
A common mistake involves using the ‘shortcut method’ to claim working from home expenses and then claiming additional amounts for expenses such as mobile phone and internet bills, as well as the decline in value of equipment and furniture.
The working from home shortcut method is all-inclusive.
There are three methods available to claim a deduction for working from home expenses depending on individual circumstances; namely, the shortcut, fixed rate and actual cost methods.
The method that gives the best outcome can be used, as long as the eligibility and record-keeping requirements for the chosen method are observed.
A common mistake involves using the ‘cents per kilometre’ method to claim car expenses, and then double dipping by separately claiming expenses such as fuel, car insurance, and registration.
The cents per kilometre rate is all-inclusive and already covers decline in value, registration, insurance, maintenance, repairs, and fuel costs.
Taxpayers cannot claim expenses that have already been reimbursed by their employer.
The ATO has announced four key areas that it will be focusing on for Tax Time 2022:
- Work-related expenses.
- Rental property income and deductions.\
- Capital gains from crypto assets, property, and shares.
Before claiming income tax deductions for their expenses, taxpayers must ensure:
- they spent the money themselves and were not reimbursed;
- if an expense is for both income-producing and private use, only the portion relating to producing income is claimed; and
- they have a record to prove it.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.