Our Insights

As you are getting your information ready for us to prepare your 2021–22 income tax return, here is a short list of things that the Australian Taxation Office (ATO) is on the lookout for this tax season.

If you currently have dealings in these areas, we recommend that you ensure that your documentation is in order, as we will be following up on these items.

Protective items during the pandemic

You may be able to claim a deduction for the cost of buying protective items, such as a face mask, to wear at work if:

• you are required to be at your place of work
• it is not provided by your employer, and
• you need to wear or use the protective item because your duties bring you in close contact with clients.

If your private use of the item is no more than incidental to your protection from the risks you are exposed to while at work, you can claim the full amount.

Accommodation and travel expenses

Accommodation expenses can only be deductible if you:

• are travelling for work
• sleep away from your home overnight for work, and
• pay for the accommodation expenses yourself.

If this applies to you, you may also be able to claim travel and meal expenses.

However, you cannot claim a deduction for accommodation expenses if you choose to stay overnight at a location that is closer to your usual workplace, or you are living at a location away from your home.

Rental property repairs, maintenance and capital expenditure

The ATO is reminding people with rental properties about the differences between a repair and items that will be deductible as capital expenditure.

In particular, you need to be aware of the distinction between ongoing repairs and maintenance which keep a property in a “steady-state” of repair, and expenses incurred on upgrading, improving or changing the nature or functionality of the property. The latter expenses are generally capital and written off over a number of years.

Wash sales and artificial capital losses

Wash sales typically involve the disposal of assets such as cryptocurrency and shares just before the end of the financial year, where after a short period of time, the taxpayer reacquires the same or substantially similar assets.

The ATO is warning taxpayers against engaging in wash sales to artificially increase their capital losses to reduce their expected capital gains. Effectively, a wash sale is disregarded for tax purposes, nullifying the capital loss.

If you are planning to make claims regarding these items this year, we will be expecting additional documentation so that we can get a clearer picture.