ATO focus areas for tax time 2023

By Elinor Kasapidis

The ATO is maintaining its focus on work‑related expenses and rental property deductions this year. Cryptocurrency and private use of business assets are also mentioned regularly.

With a revised fixed rate of 67 cents per hour for working from home (WFH) expenses from 2022-2023, the ATO is expected to check that taxpayers are using the new method properly and are keeping proper records.

Poor record keeping and misunderstanding the rules tend to be behind many incorrect claims, so confirm that client receipts, diaries and logbooks are in order, and that client claims are reasonably arguable.

Check that claims from clients have sufficient connection to their work, that they have not been reimbursed and encourage them to keep digital records. The ATO’s myDeductions app uploads information straight into Online Services for Agents (OSfA), making it easier for practitioners too.

 

"Educate clients about how to get deductions right, what the consequences of making false claims are and how the ATO uses data analytics to detect incorrect returns."

 

Adjusting claims for private use can be a challenge because employees often include non-work kilometres, landlords deduct for periods of private use and small business owners spend company money on personal expenses.

Educate clients about how to get deductions right, what the consequences of making false claims are, and how the ATO uses data analytics to detect incorrect returns.

Ask clients directly about other forms of income, such as selling goods and services online, trading shares through apps or whether clients have any cryptocurrency. Clients are often unaware that they must report and pay tax on their “side hustle”, so they may not mention it – or their trading on foreign exchanges or swapping their Bitcoin for Ethereum.

The ATO regularly collects data from crypto exchanges, and a new sharing economy reporting regime commences on 1 July 2023.

For those who have clients with professional firms or trusts, consider the ATO’s now-finalised guidance on the allocation of professional firm profits and reimbursement agreements.

What to consider now

Although tax returns may not be due until 2024, it is worthwhile reminding clients that, over the next few weeks, they need to:

• Document trust resolutions and dividend declarations before 30 June 2023
• Review and finalise Single Touch Payroll (STP) declarations by 14 July 2023 or the relevant closely held payee due date
• Correct any superannuation guarantee errors by lodging and paying the Superannuation Guarantee Charge (SGC) statement
• Lodge Taxable Payments Annual Reports (TPAR) by 29 August 2023

Temporary full expensing is also ending this year, so clients may wish to make last‑minute purchases that can be installed and ready for use by 30 June 2023.

Now is also a good time to help clients set some new financial year resolutions, such as investing in digital accounting software, considering e-invoicing and improving their record keeping to make tax time easier in the future.

Many practitioners have observed increasing ATO debt collection activity throughout 2022–2023. For clients with tax liabilities, the best way to resolve tax debts is to talk with the ATO and arrange a workable payment plan, otherwise Director Penalty Notices (DPN) or disclosures to credit bureaus may follow. In some cases, referring the client to a small business restructuring or insolvency practitioner is worth considering.

Many practitioners are experiencing ongoing pressures in their lodgement programs. For those who are still struggling to manage 2022–2023 tax returns, consider contacting the ATO to discuss the situation and options.

Look ahead for best results

The range of services that tax agents provide expands each year, so it is wise to review letters of engagement regularly. Ensure that they properly reflect the terms and scope of the engagement and the specific tax agent services being provided.

This may include whether the tax agent will conduct any follow‑up action that the client or the ATO requires, or whether the engagement includes assurance of tax records.

The ATO is gathering and data matching more information than ever. Maximise the use of information that is available and ask clients about unexpected items or large variations from prior years. Take the opportunity to confirm their communication preferences and help them transition to digital communication.

Increasing numbers of Australians want to lodge their tax returns as early as possible to access their refunds, and they often go to their tax agent straight after 30 June. With some pre‑fill details taking up to mid-August to become available, it is important to highlight the risks of early lodgement to clients, including amendments and penalties.

The ATO’s tax gap work has highlighted significant non-compliance with car fringe benefits. Discrepancies between goods and services tax (GST) and income tax amounts also attract the ATO’s attention. When preparing a tax return, use the opportunity to review and reconcile accounts for other obligations, such as GST and fringe benefits tax, to identify and correct errors.

With cyber risk now part of the business landscape, check that client verification processes are consistent with Tax Practitioners Board (TPB) and ATO guidance, and ensure that security of client information is maintained.

All notifiable data breaches must be reported to the Office of the Australian Information Commissioner. The ATO should also be notified where it relates to a client’s TFN and tax affairs.

As always, follow the Code of Professional Conduct for tax practitioners and the TPB’s guidance on reasonable care, supervision and control, and outsourcing and offshoring.