While tax time is still some four months away, the Tax Office noted that taxpayers are accruing work expenses now, and as such, need to be aware of their responsibilities for claiming deductions when the time comes.
Coming under particular scrutiny this year will be ‘other’ deductions, given that last year, 6.7 million Australians claimed a record $7.9 billion in ‘other work-related expenses’.
“It’s a significant amount of money and Australians expect us to ensure that people are not over-claiming,” said assistant commissioner Kath Anderson.
Ms Anderson said that legitimate expenses that can be claimed under this category include home office costs, mobile phone and internet, union fees, tools and equipment as well as overtime meals.
Other potential claims include working with children checks, association memberships, workshops and conferences, income protection insurance, books and magazine subscriptions and even glasses or contact lenses. Interest charged by the ATO and the cost of managing tax affairs (such as accountant fees) also fall into this category.
But, in order to be claimed, they must meet “the three golden rules”, she said.
“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.
“Many taxpayers make legitimate claims, but we are also seeing errors in some claims, and some taxpayers are making risky or outright false claims”.
According to Ms Anderson, it’s possible that legitimate claims are being denied by the ATO each year simply because of a lack of adequate proof to support the claim.
“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,” she said.
Ms Anderson said that audits and adjustments are becoming increasingly common, given the sophisticated tools and technologies being used by the ATO to ensure compliance.
“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,” she said.