ATO’s target list this 2023 tax season

For the 2023 income year, the ATO will continue to increase its compliance activities in relation to individual taxpayers, as it attempts to reduce the tax gap for individuals not in business, which was estimated to be just over $9 billion for 2019/20 (being the latest statistics available).

For the 2023 income year, based on discussions with the ATO, incorrect claims identified in recent years and discussions with tax practitioners, these seminar notes will address certain areas that are likely to receive greater attention from the ATO. These include the following:

Car expense claims under the log book method

It has recently been identified that many of the ATO’s audits regarding car expense claims under the log book method in Division 28 of the ITAA 1997 contained errors, resulting in incorrect claims being made under this method.

On this basis, it is expected that the ATO will heavily scrutinise car expense claims under the log book method for the 2023 income year, with a particular focus on identifying log book records that do not comply with the stringent log book requirements in Division 28.

Claims for ‘work horse’ vehicles

In recent years, the ATO has become increasingly concerned about claims for motor vehicle expenses that relate to the use of a vehicle that does not qualify as a ‘car’ (which are often referred to as ‘work horse’ vehicles).

In particular, the ATO has become increasingly concerned about claims for these vehicles that are based on a 100% (or close to a 100%) work-related or business use, especially where an individual has the use of another vehicle for private purposes.

Using cryptocurrency losses

With the value of cryptocurrencies recently plummeting (especially the price of Bitcoin and Ethereum), it is anticipated the ATO will be paying closer attention to those individuals who are utilising losses from the disposal of cryptocurrencies.

In most cases, this will include individuals who trigger capital losses from the disposal of cryptocurrency held for investment purposes and who are looking to offset those capital losses against capital gains derived in the same income year.

Asset disposals that generate losses (‘wash sales’)

The ATO has also recently warned taxpayers who hold assets with unrealised losses not to engage in asset wash sales.

This usually involves the disposal of assets (e.g., shares and cryptocurrency), often just before year-end, in order to artificially increase capital losses or allowable deductions and reduce capital gains or assessable income.

For more information or assistance, reach out to the team @HKSRussell
t: + 61 7 3177 4120

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