what is the ato targeting for the 20/21 financial year?

Businesses and individuals -

As tax accountants, one of the more common questions we are asked by our business and individual client's is what deductions the Australian Taxation Office is targeting for the current financial year.  Whilst the ATO do release area's of focus for each financial year, the reality is that the ATO are constantly on the lookout for undeclared income and incorrect or inflated deductions in all tax returns.  This can be as simple as targeting a deduction in a tax return that is higher than usual, or looking at industry averages for your occupation and seeing whether your deductions fall at or below these averages.  The ATO's use of technology has given them many avenues to review all of the income declared and work related expense claims that are made.

One thing we certainly have noticed is that the ATO has been far more active in recent months now that the economy seems to be on the rebound post-Covid 19.  We have seen this through the ATO's active pursuit of outstanding debts and the issue of penalties for late lodgements.  We have no doubt this will continue through to greater scrutiny of tax returns for the 20/21 financial year.  

In recently released figures, it has been revealed that individual work related expense deductions fell by nearly $1 billion in the 2018/19 year, following the ATO's public crackdown on incorrect and over inflated deductions.  With Australia now in the midst of an economic recovery, the ATO will continue with this push.

It has also been revealed that the ATO has warned small businesses to expect greater focus on their tax returns for 20/21, through data matching techniques to ensure all income has been reported and scrutinising expense claims.

So what are the main area's of focus for the Australian Tax Office for 20/21?  Below is a summarised list of what the ATO has released.  To help navigate the maze of tax rules and allowable deductions, please be sure to book an appointment with us to have your business or personal tax returns done by clicking here.

ATO area's of focus for individual tax returns -

• Incorrect or inflated working from home deductions.
• Incorrect clothing and laundry expenses.
• Self-education expenses.
• Car and travel expenses.  All vehicle travel must be able to be proven and justified.  Also, given the travel restrictions introduced as a result of Covid 19, the ATO expects that car and travel expense deductions should reduce accordingly.
• Deductions that appear to be a 'copy and paste' from previous years.
• The ATO will be paying particular attention to those with deductions that are higher than those with similar job's and income.
• This year, it has also been revealed that the ATO will use data matching programs for rental properties to ensure all rental property details are being disclosed.

ATO area's of focus for businesses -

• Greater focus placed on income delcared through the use of data matching techniques.
• Scrutinizing expense claims, in particular the use of the temproary full expensing measures for assets purchased.
• Analysing expense claims to ensure no private expenses are claimed through the business.

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