Tax office cracks down on work-related expense claims

The Australian Taxation Office (ATO) is targeting work-related expense claim.

This year the Australian Taxation Office (ATO) declared it would be increasing its focus on work-related deductions. Assistant commissioner Kath Anderson had expressed concerns that taxpayers are “pushing the envelop” and claiming illegitimate expenses.

“For example, last year taxpayers claimed a record $7.9 billion for other work-related deductions”, she said.

Already the ATO has contacted one million taxpayers to audit non-compliance with deducting work-related expenses, resulting in amendments reaching in excess of $100 million. However, much of the increase in amendments was due to the advancement of ATO technologies that allow data to be matched to various sources like share registries, property title records & other financial institutions.

In the past it was prohibitive to investigate smaller tax refunds, but it is now becoming much more cost effective.

One method the ATO has employed to great success is the use of benchmarks to determine the average claim for work-related expenses for any given occupation, with potentially higher claims flagged for review by the ATO before issuing the tax refund. 

Any individual that has claims above the average is at risk of looking suspect in the eyes of the tax office.

It is important to note that tax practitioners are not required to sight all your documentation or receipts. We are required to take reasonable care, and therefore it is important that you keep good records in the event of an ATO audit.

Penalties of 25 per cent (failure to take reasonable care), 50 per cent (recklessness), and 75 per cent (intentional disregard) can be applied to the tax amendments.

It is important that all claims are correctly substantiated and apportioned for any private or non-work related use.

The three “golden rules” to claiming work-related deductions are:

  • to claim an expense you must have paid for something and not been reimbursed;
  • it must be directly related to earning income and not a private expense; and
  • you must have a record to prove it.

Ensure work-related expenses are essential to your employment, not just related to their work.

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