Deduction item D10 (cost of managing tax affairs) to be split

In response to feedback and recommendations from the tax profession, the ATO has announced that for Tax Time 2018 it will implement a change to split deduction label D10 – the cost of managing tax affairs – on the individual income tax return. Deduction item D10 (cost of managing tax affairs) to be split

As practitioners will be aware, among other things, label D10 currently includes deductible amounts of ATO interest charges and litigation costs.

The ATO is concerned that the aggregation of these expenses distorts interpretation and analysis of what costs are actually being claimed.

It has therefore announced that to improve transparency around deductions being claimed and counteract any misunderstanding, label D10 will, on the 2018 individual tax return, be split into three sub-components comprising:

  • cost of managing tax affairs
  • deductible ATO interest charges
  • litigation costs.

Also the ATO plans to rename label D10 with a new title to better describe the collective nature of its three sub-components. These changes will apply for the 2018 and all future financial years for individual tax returns.

The ATO is also working internally with digital service providers to implement the change, and says it will communicate this more widely to individuals and the profession in the coming weeks through the usual communication channels.

To complement this change, the ATO will also add a new category to the other income label (24) to capture assessable amounts of ATO interest charges.

Deduction item D10 (cost of managing tax affairs) to be split Deduction item D10 (cost of managing tax affairs) to be split Deduction item D10 (cost of managing tax affairs) to be split