The Australian Tax Office (ATO) is warning taxpayers they will be paying close attention to claims for ‘other’ work-related expenses this year, and is reminding people to keep appropriate records.
Assistant Commissioner Kath Anderson said that last year 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’. “It’s a significant amount of money and Australians expect us to ensure that people are not over-claiming.”
This year the ATO is shining a spotlight on ‘other’ deductions. Legitimate ‘other work-related expenses’ can include home office, union fees, mobile phone and internet, overtime meals and tools and equipment.
“However, they are only deductible if they meet the three golden rules. Firstly, you must have paid for it and not been reimbursed, secondly, it must be directly related to earning your income and not a private expense, and thirdly, you must have a record to prove it.”
Even though tax time is months away, taxpayers will be incurring expenses now. It’s important to remember what you need to do to be able to claim a deduction.
“Many taxpayers make legitimate claims, but we are also seeing errors in some claims, and some taxpayers are making risky or outright false claims”.
“Substantiation will be a key focus area for the ATO this year,” Ms Anderson said. “It’s important that you have a record of the expense and can demonstrate how you calculated your claims. Every year we disallow lots of claims because there is no evidence to prove the expense. Yet it’s so easy to keep an electronic record.”
“And remember, if your expenses are for both work and private use you can only claim a deduction for the work-related portion. We are seeing quite a few examples of people trying to claim the whole expense, including the private portion. Like some who incorrectly claim their entire phone and internet bundle, and others who claim an overseas study trip even though they had a holiday as part of the trip.
“These might not always be big amounts, but together they add up,” said Ms Anderson. “Plus, no matter how small, it’s not ok for someone to expect the rest of us to pay for their private expenses.”
Ms Anderson warned that the ATO has sophisticated systems and analytics to ensure wrongdoing doesn’t fly under the radar. “If a claim raises a red flag in the system, we will investigate further. We have a range of strategies to make sure people pay the correct amount of tax, ranging from help and education through to audits and even prosecution for more serious cases.”
“This year we have reached over 1 million taxpayers to support correct reporting and address non-compliance around work-related expenses. So far these activities have resulted in adjustments of over $100 million.”
Ms Anderson advised that to make tax time easier, taxpayers can use tools such as myDeductions in the ATO app to save and store accurate information about their deductions during the income year, which they can upload to their myTax return or provide to their tax agent.
“Last year tens of thousands of taxpayers uploaded details of their deductions directly into myTax or to their tax agent, and nine out of 10 of them told us they intend to use it again.”
To find out more about what deductions you can legitimately claim this tax time, visit: ato.gov.au/deductions
To find out more about the penalties for making false or misleading statements, visit: ato.gov.au/penalty
For more information myDeductions, visit: ato.gov.au/mydeductions.