ATO Announces Key Focus Areas for Tax Time 2023: Rental Property Deductions, Work-Related Expenses, and Capital Gains Tax

The Australian Taxation Office (ATO) has announced its top priorities for Tax Time 2023: rental property deductions, work-related expenses, and capital gains tax (CGT). These focus areas reflect common mistakes that often trigger audits, adjustments, and unexpected tax bills.

Rental Property Deductions: 90% of Owners Are Getting It Wrong

Rental property owners are under the spotlight in 2023, with the ATO revealing that 9 in 10 landlords make errors on their tax returns. These typically include:

• Omitting rental income (such as from Airbnb or holiday rentals)

• Incorrectly claiming expenses not directly related to income generation

• Misallocating loan interest where the loan is partially used for private purposes

Tip: Ensure you only claim interest expenses proportionate to the part of the loan used for rental purposes. Don’t include private or redraw components.

If you’ve refinanced or used part of your loan for personal reasons, your interest deduction must be carefully adjusted. Always retain detailed documentation and discuss with your tax agent.

Work-Related Expenses: No More “Copy and Paste” from Last Year

With hybrid and office work models now more common, the ATO warns against reusing last year’s claims without updating them. In particular, they’re examining:

• Working from home (WFH) expense claims

• Lack of evidence and proper record-keeping

• Over-claimed mobile, internet, and occupancy expenses

There are two methods to claim WFH deductions:

1. Actual cost method – Requires detailed receipts and calculations.

2. Revised fixed rate method – From 1 July 2022, the rate increased to 67c per hour. You must keep a log of your hours and proof of associated costs.

Tip: If you’ve returned to the office or hybrid work, reduce your claims accordingly. Keep timesheets or rosters to prove your WFH hours.

Capital Gains Tax (CGT): Selling Property or Crypto? Declare It.

The ATO is cracking down on undeclared CGT events, particularly with the rise in property and cryptocurrency transactions.

Key areas of concern:

• Failure to declare gains from selling crypto, shares, or property

• Misunderstanding CGT exemptions for the main residence

• Overlooking CGT when using your home for income (Airbnb, business, etc.)

Tip: If your main residence was used to generate income, CGT may apply on the proportion used for that purpose. Record the exact dates and areas of use.

Smaller Refunds or Tax Debts? Don’t Delay.

With inflation and reduced offsets impacting returns, many Australians may face lower refunds or even tax debts in 2023. The ATO encourages early engagement:

• Lodge early, especially if you're expecting a tax bill

• Work with a registered tax agent

• Contact the ATO or your accountant if you’re unable to pay your debt upfront—payment plans are available

Tip: Don’t wait for a notice of assessment shock. Review your expected refund or liability with your tax advisor now.

Final Word from Dolman Bateman

Tax Time 2023 brings tighter scrutiny and reduced room for error. Whether you’re a property investor, a hybrid worker, or dabbling in crypto, accurate records and professional advice are essential.

We’re here to help. At Dolman Bateman, we work closely with individuals and businesses to ensure compliance, maximise deductions, and avoid ATO scrutiny.

Need help navigating your 2023 tax return? Contact us today and let our expert team take the stress off your shoulders.

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Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.