ATO’s Top Areas of Focus for the 2021 Tax Year

The ATO have released a list of areas that they will be keeping an eye on for the 2021 Tax Returns, which people will starting to prepare in the next few weeks.

Cryptocurrency Transactions

The outbreak in cryptocurrency trading has prompted the Australian Taxation Office (ATO) to keep an eye on any capital gains tax (CGT) omissions on the assets in the 2020–21 tax year.

Cryptocurrency investment joins property and share trading as key CGT areas on which the ATO is now focused.

The concern is many taxpayers think cryptocurrency gains are tax-free or only taxable when converted to Australian dollars.

This is not correct.

Taxpayers need to be aware of other transactions that create a taxable gain or loss, including buying, gifting or trading between cryptocurrencies.

Buying goods and services can create a taxable transaction, and lack of clarity around the crypto market may create a belief that such trades are above the law.

This year the ATO will write to 100,000 taxpayers with cryptocurrency assets to explain their tax obligations and ask them to review previous returns. Some 300,000 taxpayers will also be prompted to report CGT gains and losses.

Work-related Expenses in a COVID-19 World

Work-related expenses are an ongoing focus of the tax office, especially given the changes in work patterns COVID-19 caused during 2020.

With April 2021 Australian Bureau of Statistics figures showing 36 per cent of people working at least one day a week from home, it looks like this trend will continue.

Working From Home: The Shortcut Method

The ATO has acted on positive feedback from agents last year and extended its temporary shortcut method for calculating working from home expenses.

Taxpayers simply need to keep a record (through diary entries, timesheets, or roster) of the number of hours per week worked from home.

The shortcut method is all-inclusive, which means it covers all the running costs, cleaning, cooling, heating, lighting and internet and telephone costs and depreciation of home office equipment.

Airbnb Income Is Still Taxable

Investment properties are still under scrutiny by the ATO.

Allowable deductions for investment properties include borrowing expenses and capital expenditure on renovation and general upkeep.

Interest claims during periods when the property isn’t rented should not be included, nor should redrawing on loans for personal expenditure.

ATO Follows The Money

The ATO receives data from a lot of organisations, banks, state revenue offices, land title offices, motor vehicle and share registries, accommodation sharing platforms and cryptocurrency platforms.

It uses this data to pre-fill returns and prompt people about their income and asset sales at lodgement.

Any Questions?

If you have any questions regarding the treatment of any income, please get in touch with us.