Every year the ATO reminds us that “this year we are paying close attention to what people are claiming as ‘other’ work-related expense deductions”. This comes after a number of people have been found by the Administrative Appeals Tribunal (AAT), to have made false claims on their tax returns.
An IBM salesman claimed $5,400 for secretarial services, which was paid to his seven-year-old son as he “sometimes ran upstairs to the study when the phone was ringing, answered the phone and then handed it to his father”. He further claimed that items such as a “Dora the Explorer” pencil case, heart and star-shaped stickers and crayons were deductible stationery items. The AAT (Administrative Appeals Tribunal) found that “none of those were used in the course of gaining or producing his assessable income“ and that “plainly, they are items purchased for use by his children”.
Other work-related expenses include home office costs, phone or internet charges and tools and equipment. Tax Agents are being advised that clients are not automatically entitled to claim standard deductions. In other words, regardless of what the expense thresholds may be, you can only claim what you have actually incurred as an expense and be able to provide evidence of these expenses.
Another taxpayer claimed more than $73,000 as work-related and self-education expenses, of which $30,000 was said to be for travelling from work to university and subsequently home, in his Maserati. The tribunal rejected most of these expense deductions, allowing only a computer expense and a minimal amount of travel to a conference.
According to the ATO assistant commissioner, it is becoming more common for people to try to claim the full amount for expenses with a work-related and private portion, such as internet and phone bundles, and overseas study trips with private holiday expenses included.
Since July 2016, the ATO have adjusted $100 million of incorrect claims by taxpayers. The ATO’s representative said, “It’s not OK for someone to expect the rest of us to pay for their private expenses”. If you are claiming a phone and internet bundle, you need to carefully consider how much of the expense is actually incurred as a work-related expense and how much of it is used for private purposes.
The ATO have also warned that they will investigate further “if a claim raises a red flag in the system”. When reviewing what expenses you may claim in your 2018 tax return, it is important to keep the following rules in mind:
- You have paid the money yourself for the expense and have not been reimbursed.
- The expense is directly related to you earning your income.
- You have a record to prove the payment of the expense.
The overall message from the ATO is to avoid “making risky or outright false claims”. The MyDeductions tool in the ATO app can help you keep track of any deductions, which you can then email to your Accountant to include in your tax return. Make sure to keep any relevant records to prove the expense or how you calculated your claim, to avoid being a ‘red flag’ in the system.
