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At tax time, record keeping is the name of the game

As tax time gets closer, accountant GAIL FREEMAN has some practical tips to getting through the paperwork.

With tax time looming, Jordyn called to ask if there was anything different he should know about his 2022 tax return.

“Well, not so much different but the Australian Taxation Office (ATO) has announced its areas of concern and what they are expecting to see so it is opportune that you asked,” I told him.

“The first concern is record keeping. You may be aware that the ATO receives a lot of information about things such as car sales and purchases, property sales and purchases, share sales and purchases and crypto-currency sales and purchases. 

Gail Freeman.

“So it’s really important you have proper records that can substantiate your claims so that they match up with the ATO information. 

“The ATO also recommends that you don’t lodge too early as they may not have received all the information in early July.”

I told him that the second concern related to working from home. There were three different ways that he could claim his working-from-home expenses. 

“These are the actual costs method, 52 cents an hour and 80 cents an hour,” I said.

“The record-keeping requirements are different for each method. If you use actual costs you need to apportion the costs very carefully and your calculations must be available in the event of an audit. 

“You can’t just say it’s about 1/3 of the house, so that’s my claim. If you claim 52 cents an hour you need to keep a diary for one month that you then extrapolate over the year and if you claim 80 cents an hour, you need a record of every day worked from home and the number of hours you worked each day. If you use this method you cannot claim any other costs, such as computers or phones.”

Jordyn said: “Goodness, Gail. I didn’t realise how complex this is.”

I said: “There’s more, I’m afraid: next are the phone claims, you need to keep a log for one month of your phone usage split into business and private use, as well as separating data useage. 

“Those ratios are then extrapolated across the year for your claim. Some of the telephone companies will send you itemised bills, which makes it easier for you to work out which calls are for business. 

“If you cannot provide a business percentage then your claim is limited to $50 for the full year for the phone and $50 for the full year for data. This is probably much less that you would have been able to claim with proper records.

“The next item the ATO is checking is rental income and deductions. The ATO is interested in correct apportionments if you do not rent the whole of the property.

“For example, where there are two properties on the same block. They are also concerned that insurance payouts are correctly recorded in your tax return. 

“I have had a few instances of clients receiving insurance monies to cover loss of rent and not realising that needed to be included in their returns. The other thing that is often missed is when someone receives part of the bond back to cover repairs or lack of notice on vacating. That is also required to be included in your tax return.”

On that note, Jordyn set off to assemble his documents for tax time.”

If you need advice on your tax returns or any other tax-related matter. Contact the friendly team at Gail Freeman & Co Pty Ltd on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser.
Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.

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