With over eight million Australians claiming work-related expenses each year, .....
..... Assistant Commissioner Graham Whyte is reminding people to make sure they get their deductions right this tax time.
“Australians claim over $21 billion in work-related expenses each year, and we want to support taxpayers to claim what they are entitled to – no more, no less,” Mr Whyte said.
“Most Australians want to do the right thing, but we are seeing mistakes, and while the amounts at an individual level are relatively small, collectively the overall impact is significant. That’s why, it is important for people to get their deductions right.
“From time to time we see people deliberately making incorrect claims. We’ve seen claims for car expenses where log books have been made up and claims for self-education expenses where invoices were supplied for conferences that the taxpayer never attended.
“Deliberately making incorrect claims is an easy way to get into some serious trouble. It’s just not worth it.”
Mr Whyte said while most tax agents are there to help you do the right thing, sometimes the ATO identifies tax agents offering special deals, inflating claims to generate larger refunds.
“If it sounds too good to be true – it usually is. The ATO takes action against tax agents who make dodgy claims, but to protect yourself, make sure your tax agent is registered. You can check on the Tax Practitioners Board website.”
Mr Whyte said in 2014-15, the ATO conducted around 450,000 reviews and audits of individual taxpayers, leading to revenue adjustments of over $1.1 billion in income tax.
“Cases involved omitted income or over-claimed entitlements like deductions. This included people making claims significantly different to those made by taxpayers in similar circumstances,” Mr Whyte said.
“Every tax return is scrutinised using increasingly sophisticated tools and data analytics developed by our ‘Data Doctors’ at the ATO. This means we can identify and review income tax returns that may omit information or contain unreasonable deductions.
“When a red flag is raised, our staff investigates further and if your claims seem unusual we will check them with your employer.
“If you’ve made a mistake, this will hold up the processing of your tax return, so it’s best to make sure you claim the right deductions from the start.”
My Whyte said this year the ATO has introduced real-time checks of deductions for tax returns completed online.
“If your claims are substantially higher than others in similar occupations, earning similar amounts of income, a message will appear, asking you to check them. This new process is just about helping you to make sure your claims are correct,” Mr Whyte said.
“If you are doing the right thing you have nothing to worry about. If you make an honest mistake we will help you fix it up and correct your tax return. We will not penalise you if you genuinely tried to get it right.
“But, if you didn’t make a reasonable or genuine attempt to get it right or are intentionally doing the wrong thing, you may receive a penalty.
Mr Whyte said it was easy to keep on the right track with your work-related expense claims by remembering three golden rules.
“One, make sure you spent the money yourself and were not reimbursed. Two, make sure it is related to your job, and not a private expense. Three, keep a record to prove it,” Mr Whyte said.
“We’ve got a range of guides including specific occupation guides on our website to help people understand what they can claim. If you use a tax agent, you can also ask them for advice on the right things to claim.
“You can also make it easier on yourself by using the myDeductions tool in the ATO app to record your work-related expenses on the go. You can then upload directly into your next tax return just like your pre-filled information.”
For more information on work related expenses, visit ato.gov.au/deductions
For guides on deductions for specific industries and occupations, visit ato.gov.au/occupations
Case study one
A railway guard claimed $3,700 in work-related car expenses for travel between his home and workplace. He indicated that this expense related to carrying bulky tools – including large instruction manuals and safety equipment. The employer advised the equipment could be securely stored on their premises. The taxpayer’s car expense claims were disallowed because the equipment could be stored at work and carrying them was his personal choice, not a requirement of his employer.
Case study two
A wine expert, working at a high end restaurant, took annual leave and went to Europe for a holiday. He claimed thousands of dollars in airfares, car expenses, accommodation, and various tour expenses, based on the fact that he’d visited some wineries. He also claimed over $9,000 for cases of wine. All his deductions were disallowed when the employer confirmed the claims were private in nature and not related to earning his income.
Case study three
A medical professional made a claim for attending a conference in America and provided an invoice for the expense. When we checked, we found that the taxpayer was still in Australia at the time of the conference. The claims were disallowed and the taxpayer received a substantial penalty.
Case study four
A taxpayer claimed deductions for car expenses using the logbook method. We found they had recorded kilometres in their log book on days where there was no record of the car travelling on the toll roads, and further enquiries identified that the taxpayer was out of the country. Their claims were disallowed.
Case study five
A taxpayer claimed self-education expenses for the cost of leasing a residential property, which was not his main residence. The taxpayer claimed he had to incur the expense of renting the property as he ‘required peace and quiet for uninterrupted study which he could not have in his own home’. This was not deductible.
In addition to the rental expenses, the cost of a storage facility was claimed where ‘the taxpayer needed to store his books and study materials’. They claimed they needed this because of the huge amount of books and study material associated with his course and had no space in his private or rented residence where these could be housed. This was not deductible.
The cost of renting the property was around $57,000, with additional expense of $7,500 for the storage facility. The actual cost of the study program he attended that year was only $1200.