What the tax office will be cracking down on this year

THE Australian Taxation Office has made rental deductions a top priority and will continue to crackdown on work-related expense claims as the end of financial year draws closer.

Data compiled by the ATO revealed a random sample of returns with rental deductions found that nine out of 10 contained an error.

ATO assistant commissioner Karen Foat said it was concerned about the extent of non-compliance in this area.

In 2017, more than 2.2 million Australians claimed more than $47 billion in rental deductions.

"We will use our sophisticated data and analytics to review all returns and where something appears out of the ordinary, we will ask the taxpayer or their agent for more information to support their claims," she said.

"In terms of in-depth audits, we expect to double the number of in-depth audits we conduct to 4500 this year, with a specific focus on over-claimed interest, capital works claimed as repairs, incorrect apportionment of expenses for holiday homes let out to others, and omitted income from accommodation sharing."

Ms Foat said the ATO had concerns around taxpayers claiming deductions where they have not spent the money, not apportioning expenses where there was private use and not keeping records to support claims.

"While it appears taxpayers are starting to hear our message, with the average work-related expense claim decreasing for the first time in almost 25 years, we continue to see errors so are maintaining our focus in this area," she said.

"Our efforts to reduce the gap in relation to over-claimed work-related expenses have focussed on prevention, ranging from enhanced guidance and advice, through to better data and technology to help taxpayers get their claims right up front, as well as enforcement activities."

Harding and Martin Chartered Accountants personal income tax consultant Judy Caro said people should not be claiming anything on their tax return they did not actually spend, including usual 'standard' deductions.

"They are looking at everything that an individual would claim... even laundry expenses," she said.

"That includes just about everything... home office expenses, car expenses and work related expenses."

She said it was important to have proof of anything claimed, no matter how small.

"A lot of people would claim 5000km, which is the limit (in the past) without needing a receipt," she said.

"The tax office will be indicating that if you claim 5000km for work related expenses, you have to be able to say how and why you calculated that number of kms.

"You must be able to indicate why you're making the claim.

"In the past people were able to claim $300 as the standard deduction without having to prove the claim. The tax office is actually looking at whether or not they have incurred the expense. There's no minimum or maximum standard claim - you have to have a receipt for it."

All businesses no matter how big or small will be required to transition to the Single Touch Payroll system in the next financial year and this will mean changes for some employees.

This will mean not all employees receive a PAYG statement.