“Australians claim over $21 billion in work-related expenses each year, and we want to support taxpayers to claim what they are entitled to – no more, no less,” says ATO assistant commissioner Graham Whyte.
He says it is important to try not to make mistakes, as even small mistakes result in significant refund delays.
“If you’ve made a mistake, this will hold up the processing of your tax return, so it’s best to make sure you claim the right deductions from the start,” he says.
“If you are doing the right thing, you have nothing to worry about. If you make an honest mistake, we will help you fix it up and correct your tax return.
“We will not penalise you if you genuinely tried to get it right.”
If people try to cheat the system by illegitimately claiming deductions, however, there can be severe consequences.
“Deliberately making incorrect claims is an easy way to get into some serious trouble. It’s just not worth it,” Mr Whyte says.
“Cases involved omitted income or over-claimed entitlements like deductions. This included people making claims significantly different to those made by taxpayers in similar circumstances.”
Mr Whyte says that every tax return is looked at in detail with tools and data analytics developed by in-house ‘data doctors’. If something comes up that doesn’t look right, ATO staff investigate further.
“If you didn’t make a reasonable or genuine attempt to get it right, or are intentionally doing the wrong thing, you may receive a penalty,” he says.
Mr Whyte says these four tips will help ensure you make accurate claims for deductions on your tax return:
- Make sure you spent the money yourself and were not reimbursed;
- Make sure deductions are related to your work, and not a private expense;
- Keep a record to prove your deductions; and
- If you use a tax agent, make sure they are registered.
“The ATO takes action against tax agents who make dodgy claims, but to protect yourself, make sure your tax agent is registered.”
Dodgy deductions in action
To demonstrate the no-no's in claiming deductions, the ATO has provided five real-life case studies of dodgy deductions. Unless you're up for paying the tax man even more through fines and penalties, definitely don't try these for yourself!
Case study one
A railway guard claimed $3,700 in work-related car expenses for travel between his home and workplace. He indicated that this expense related to carrying bulky tools – including large instruction manuals and safety equipment.
The employer advised that the equipment could be securely stored on their premises. The taxpayer’s car expense claims were disallowed because the equipment could be stored at work and carrying them was his personal choice, not a requirement of his employer.
Case study two
A wine expert, working at a high-end restaurant, took annual leave and went to Europe for a holiday.
He claimed thousands of dollars in airfares, car expenses, accommodation, and various tour expenses, based on the fact that he’d visited some wineries. He also claimed over $9,000 for cases of wine.
All his deductions were disallowed when the employer confirmed the claims were private in nature and not related to earning his income.
Case study three
A medical professional made a claim for attending a conference in the US and provided an invoice for the expense.
When the ATO checked, it discovered that the taxpayer was still in Australia at the time of the conference. The claims were disallowed and the taxpayer received a substantial penalty.
Case study four
A taxpayer claimed deductions for car expenses using the logbook method.
The ATO found they had recorded kilometres in their logbook on days where there was no record of the car travelling on the toll roads, and further investigation identified that the taxpayer was actually out of the country at the time. Their claims were disallowed.
Case study five
A taxpayer claimed self-education expenses for the cost of leasing a residential property, which was not his main residence.
The taxpayer claimed he had to incur the expense of renting the property as he ‘required peace and quiet for uninterrupted study, which he could not have in his own home’. This was not deductible.
In addition to the rental expenses, the cost of a storage facility was claimed, where ‘the taxpayer needed to store his books and study materials’. He claimed he needed this because of the huge amount of books and study material associated with his course, and because he had no space in his private or rented residence where these could be housed. This was not deductible.
The cost of renting the property was around $57,000, with additional expenses of $7,500 for the storage facility. The actual cost of the study program he attended that year was only $1,200.
As well as deductions, My Business has a wealth of other information and advice around tax time, including tips from the ATO, advice on how to reduce your tax bill and business leisure tax tips and traps.