20 Jul High work related deductions on the ATO radar
The Australian Taxation Office (ATO) has issued a warning that it will be paying extra attention to people claiming higher than expected deductions during tax time this year. The ATO’s ability to evaluate work-related expense claims has become more sophisticated due to enhancements in technology and the extensive use of data analysis. To assist taxpayers making claims for work-related expenses, the ATO has a series of occupation guides and other general advice available on its website to help people in specific industries understand and correctly claim the expenses they may be entitled to.
The ATO has stated that there are three golden rules you must consider before making a work-related expense claim:
1) you must have spent the money yourself and not been reimbursed
2) it must be directly related to earning your income
3) you must have a record to prove it.
If taxpayers are using myTax to lodge their tax returns, they will receive a real-time warning if their claims for work-related deductions are unusually high compared to other taxpayers in similar occupations.
The ATO has highlighted the following real life case studies and lessons to be learnt from taxpayers making incorrect work related expense claims:
1) make sure your claims are justified
A dairy farm employee claimed deductions totalling almost $19,000. When the ATO spoke to his employer, they said that the employee was provided with all the tools and work gear he needed to undertake his duties. The employee’s deductions were disallowed in full.
2) make sure you weren’t reimbursed already
A business analyst who travelled between Shanghai and Australia for work, claimed over $46,000 in travel expenses. When the ATO contacted the employer, they were advised that this employee was reimbursed for the cost of all his meals, accommodation and travel within Australia and internationally. Consequently the claims were disallowed.
3) make sure you are getting good advice
A tiler lodged his tax return using a registered tax agent and claimed over $4,000 in deductions relating to his car, based on transporting bulky equipment to and from work. The ATO contacted his employer who confirmed that he was not required to transport any equipment to work that would be considered bulky and also advised that secure lockers were provided at the work site to store tools. His claim was disallowed and tax agent was reminded to undertake proper enquiries to determine his clients’ eligibility to deductions.
4) make sure you have evidence to support your claims
A sales consultant claimed over $38,000 for car and other work-related expenses. When asked to provide evidence to support her deductions it became apparent that she had overstated her expenses as she could not provide receipts to substantiate her claims. After discussions with the ATO, she agreed to substantially reduce her expense claims and she was asked to pay a tax shortfall of over $8,000 plus penalties.
5) make sure your claims are related to your work
A computer network engineer claimed over $4,000 in deductions relating to car, travel, clothing and other work-related expenses, as well as the cost of managing his tax affairs. When queried, the engineer told the ATO he travelled interstate for both work and private purposes, his clothing expenses were for the purchase of general business attire and his claims for managing tax affairs related to managing the family trust. The engineer’s claims were disallowed by the ATO because they appeared to be of a personal nature and he was unable to substantiate his claims with written evidence.
6) make sure you know what is and isn’t deductible
A factory meat processing worker claimed $12,800 for various deductions. When the ATO requested evidence of his claims, the taxpayer was unable to produce receipts with the exception of the donations which were automatically deducted from his pay. Also, when ATO contacted his employer, they were advised that the worker was not required to travel for work purposes and that all protective gear and tools required to perform his duties were supplied by the company. The worker’s deduction claims were disallowed except for the gifts and donations which he was able to verify.
7) make sure you back up your data
A soldier from Canberra claimed $1,500 for self-education expenses and $5,000 for gifts and donations. When the ATO requested evidence to substantiate these claims, the soldier said all his receipts were stored as images on his tablet, which had fallen into his child’s bathtub and no longer worked. The claims were disallowed.