In Australia last year, 14 million people lodged tax returns, receiving tens of billions of dollars. False claims, however, cost the ATO approximately $1.5 billion and so, with a better computer system than ever, they are clamping down on certain expenses which people are known to erroneously claim on. The ATO has warned that this improved technology will be able to identify claims which are outliers and these will be investigated.
Getting caught out by the ATO is everybody’s worst nightmares. However, if you’re aware of what expenses the ATO is specifically targeting and have advice on what is eligible and why, you can make sure that you don’t accidentally cross them. That way, you might be able to avoid a visit from an ATO auditor.
This year, the ATO are particularly focusing on unsubstantiated or unusually high tax deductions which involve work-related expenses and rental claims. Here are some of the things to particularly look out for.
Many people think that travelling to work is tax deductible. In reality, travelling to and from work is generally considered private travel and is therefore not tax deductible. You can, however, claim the cost of travel:
- Between two work places
- From work to another workplace, which is not your regular workplace, while still on duty
- If you work from home and need to travel somewhere for work by the same employer
- If you constantly shift your place of travel throughout the day before heading home
- If you need to carry bulky or heavy materials, such as a ladder, which your employer requires you to take to work with you and cannot be left at your workplace
You are not eligible to claim tax deductions on travel for minor work-related tasks, if you are on call, if you work outside of business hours, if there’s no public transport near your place of work, or if you do some work from home.
If you use a car for work-related duties, then you may be able to claim a deduction for car expenses. However, this is not applicable for travel to and from work, nor if you have been reimbursed already for these expenses.
One method that is used for claiming car expenses is for fuel and is calculated at a rate of 68 cents per kilometre. This method can be used for up to 5,000km travelled and does not require written evidence to be claimed. Because of this, many people claim this 5,000km of travel, believing it to be a ‘standard’ claim, even if they don’t use their car for work. However, red flags can come up if you are unable to explain how or why your car was needed for work and explain how you calculated your claim.
Clothing and laundry expenses have come under scrutiny, particularly given that many people automatically claim exactly $150, as this is the threshold at which people do not have to provide written evidence or claims.
If you are claiming on protective clothing purchases, laundry, or dry-cleaning, it needs to be occupation-specific clothing, protective clothing, or a work uniform. If your uniform is non-compulsory, you may still be able to claim the cost of it if it’s an item of clothing that is specific and unique to the organisation you work for including employer logo’s etc.
You cannot, however, claim normal and conventional clothing which you may also wear to work, even if it’s part of a dress code. For example, even if your workplace requires you to wear an expensive and well-tailored suit that you only ever wear to work, you are not able to claim this. Furthermore, you are only able to claim the cost of laundering or dry-cleaning of clothes which are eligible for tax deduction in the first place.
Mobile Phone and Internet Use
If you use your phone and internet for work use, you are eligible to claim these bills as tax deductible. However, you will have to differentiate your work and personal use. Keeping detailed records which show how you apportioned your private and business expenses is always a good idea.
You should also be careful not to claim on things which you have been reimbursed for, such as your phone or internet bill as tracking down who paid for it is pretty easy.
This year, the ATO are doubling the number of audits they’re doing on rental property owners due to people intentionally claiming excessive deductions. Furthermore, the ATO will also be focusing on inaccurate interest claims, capital works claimed as repairs, incorrect holiday home expenses, and omitted income from accommodation sharing.
A lot of people who short-term let, such as using a property for AirBnB, don’t realise they have to claim their income. So, if you have a rental property, make sure you are listing your income and tax deductions correctly, otherwise you may have to face the tax man.