The ATO’s very public campaign to reign in work-related expenses has seen several public statements, speeches and cautions to tax professionals and business leaders ahead of increased compliance monitoring this coming tax time.
The intensity of the tax office’s campaign suggests a policy response may be in the works.
“Treasury has been briefed with the results of ATO audits, so the government will be armed with statistics to justify a change in the work-related expenses rules to tighten them and put savings towards tax cuts for all as possible carrot,” senior tax adviser at the Institute of Public Accountants (IPA), Tony Greco, told My Business’ sister publication Accountants Daily.
“Australia has one of the most generous work-related expenses tax frameworks, so if we dodge the bullet come the next federal budget, we should consider ourselves lucky indeed,” he said.
The ATO has yet to publish its tax gap figures for work-related expenses, which estimates the budget hole inappropriate work-related expenses claims create. ATO boss Chris Jordan has previously said it’s likely the same or larger than the tax gap created by corporate tax avoidance and evasion.
Despite the absence of this data, Mr Greco said the ATO has gathered conclusive evidence through audit activity of substantial non-compliance with work-related deductions.
However, this is a frustrating development for compliant tax agents, who are now likely to be impacted by the actions of dodgy competitors which have required regulatory attention for several years.
“The ATO is playing catch up to address the issue which has been built up over many years, and many agents are tightening their practices now that the ATO is doing more random audits,” Mr Greco said.
“Not all agents should be tarnished by the same brush.”
Head of policy and corporate affairs at CPA Australia, Paul Drum, similarly told Accountants Daily he fears the persistent messaging from the ATO is signally a policy response.
“Here is a government with an appetite to make changes. I wouldn’t be surprised at all if it used the upcoming budget to come down hard on work-related expenses,” Mr Drum said.