With the ATO releasing its first-ever Individuals not in business tax gap report last year, tax agents and their clients can expect greater scrutiny from the Tax Office as it looks to tackle the $8.7 billion tax gap.
With that in mind, the Tax Office has sounded a warning that it will be taking a closer focus on several deductions this year, particularly clothing, motor vehicle expenses and rental property deductions.
With work-related car expenses, the ATO has revealed that over 3.6 million taxpayers made a claim in 20170–18, totalling more than $7.2 billion.
Of those, one in five claims were exactly at the maximum 5,000km limit for the cent per kilometre method.
Work-related clothing deductions will also remain firmly under the spotlight as the ATO believes many people are claiming this without actually incurring the expense.
Apart from work-related deductions, the ATO has also indicated its focus on the overclaiming of rental deductions and the non-declaration of rental income, after commissioner Chris Jordan said that a random audit sample of returns with rental deductions found that nine out of 10 contained an error.
With 1.8 million people owning an investment property, the ATO believes errors in rental property claims are one of the key contributors in the $8.7 billion tax gap.