RECORD KEEPING AT TAX TIME

As we move through Tax Time 2024, the Australian Taxation Office (ATO) has been ringing the bells on the importance of good record-keeping. Hills Accountants in Hobart are your local Tax Accountant Derwent Park, Moonah and Hobart, and we want to ensure you're up to speed with the latest advice to help you avoid any hiccups with your tax return this year - and next.

Why Good Record-Keeping Matters

Keeping accurate records isn't just about ticking a box—it's your safety net for making sure you claim what you’re entitled to and nothing more. The ATO, led by Assistant Commissioner Rob Thomson, has been particularly vocal about this. Whether it’s work-related expenses or rental property deductions, having the right records can save you from unnecessary stress and ensure your claims are spot-on.

Example: Work-Related Expenses

Let’s say you’ve been working from home and want to claim some deductions. The ATO has set out “three golden rules” you must follow to ensure your expenses are deductible:

• You must have spent the money yourself and not been reimbursed.
• The expense must directly relate to earning your income.
• You must have a record or receipt to prove it.

A bank statement alone isn’t enough - proper documentation is essential. And don’t be fooled by the urban myth that you can automatically claim $300 without proof. While you may not need receipts for claims under $300, you still need to show that you spent the money and how you calculated the claim.

For instance, if you’ve been working from home, the ATO’s revised fixed-rate method now requires detailed records, such as a diary or spreadsheet, showing the hours worked and the running costs involved (e.g., electricity or internet). Imagine you just copy and paste last year’s claim — tempting, right? But without the proper records, you might find yourself on the ATO’s radar, with a “please explain” letter coming your way. Better to keep those receipts and logs handy!

And here’s an important note: You must keep all tax records for a minimum of five years from the sate they are lodged. So, even if it feels like a chore now, it could save you a lot of trouble down the track.

Example: Rental Property Deductions

If you’re a landlord, this one’s for you. The ATO has noticed that 9 out of 10 rental property owners are getting their tax returns wrong.

A common mistake? Confusing repairs with capital improvements. For instance, if you replace a broken window, you can claim that as an immediate deduction. But if you renovate the entire kitchen, that’s considered a capital improvement, and you’ll need to claim it over several years. So, before lodging your return, double-check those receipts and records to ensure you’re claiming correctly.

The Perils of Rushing to Lodge

We know the feeling—getting your tax return done early is a huge relief. However, the ATO warns against jumping the gun. If you’ve got multiple income sources, it’s best to wait until late July when most of your pre-fill information is available. Rushing might mean you forget to include some of your income, leading to delays or even amendments. Nobody wants to redo their tax return, so take a breath, check your pre-fill, and lodge when everything’s in place.

Quick Tips for Tax Time 2024

• Keep Comprehensive Records: Diaries, spreadsheets, and receipts are your best friends.
• Know the Difference: Understand what constitutes a repair vs. a capital improvement.
• Wait Before Lodging: Make sure all your income details are in before hitting submit.

At Hills Accounting Hobart, we’re here to help you get your tax return right the first time. If you’re unsure about what records you need or how to claim certain deductions, don’t hesitate to give us a call. After all, a bit of preparation now can save a lot of hassle later.

Remember, this article is general in nature and doesn’t take into account your specific objectives, financial situation, or needs. For advice tailored to your circumstances, have a chat with us at Hills Accountants in Hobart.

Happy Tax Time!

For more information, email us today at admin@hillsaccounting.com.au or call us on 03 62737800