At Desborough Accountants we aim to ensure that you get the best result from your tax returns, whilst always adhering to the complex tax laws. With over eight million Australians claiming work-related expenses each year, the Australian Taxation Office (ATO) 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,” Assistant Commissioner Graham Whyte recently said.
“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 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.
“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” Mr Whyte said.
“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.”
According to Mr Whyte, there are three golden rules to keep on the right track with your work-related expense claims being;
- Make sure you spent the money yourself and were not reimbursed.
- Make sure it is related to your job, and not a private expense.
- Keep a record to prove it.
If you have any questions regarding the deductibility of your expenses, please speak to one of our accountants who will quickly be able to let you know whether the money you have spent will legitimately allow you to claim a tax deduction.
Below are some examples that give some insight into how the ATO have addressed particular expenses in real cases.
Case study one – Car expenses
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 – Travel expenses
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 – Travel expenses
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 – Car expenses
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 – Self-education
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.
Ref: ATO Media Release – 16 August 2016