News from Davidsons
Don’t get caught out – the ATO are watching
A recent media blast from the Australia Taxation Office has stated that they are paying extra attention to the deductions taxpayers are claiming, particularly those making higher than expected claims.
Assistant Commissioner Graham Whyte has stated in the media blast that the ATO’s ability to check out work-related expense claims has become more sophisticated due to enhancements in technology and the extensive use of data. “If we see a claim that appears to be unusual we will check it with the employer,” said Mr Whyte. “
So don’t be fooled, the ATO are monitoring what you are claiming.
The lessons the ATO are wanting taxpayers to note in relation to their claiming of deductions include:
1. Make sure your claims are justified
This means that you should only make claims for expenses you have legitimately incurred. By way of example, an employee who claimed expense relating to travel, accommodation and internet and phone usage had his claim denied in full once the ATO queried the claim with his employer and identified that the employee was offered free accommodation and did not need to travel or use his phone or internet for work purposes.
2. Make sure you have not already been reimbursed for the expenses by their employer
If you incur expenses in relation to your employment but your employer reimburses those costs to you, you cannot claim them as a deduction.
3. Make sure you have evidence to support your claims
If you are claiming high amounts of work related deductions, you must ensure you have receipts and documentation to verify the claims. A sales consultant for a motor dealer claimed over $11,000 for car expenses, $3,000 for clothing expenses and almost $24,000 for other work-related expenses. When asked to provide evidence to support her claims, it became apparent that she had overstated her claims and falsely claimed clothing expenses including costs for everyday work wear as well as personal expenses under the other work-related claim such as perfume and movie tickets.
4. Make sure claims relate to your work
Only those expenses you incur in relation to performing your work related duties can be claimed as a tax deduction. You cannot claim personal expenses nor can you claim expenses for items that are not necessarily required to perform your role.
For example, if you are not required to use your car for your employment, you cannot claim car related expenses. Further, if you are provided safety equipment or tools of trade from your employer, you cannot claim expenses for any costs you incur in relation to this type of equipment. The ATO will make contact with employers to clarify what costs individual employees are expected to incur in order to substantiate any higher than expected claims.
5. Make sure you are getting good advice
This may be one of the most important lessons the ATO can teach taxpayers. A qualified tax agent can guide you in relation to the types of expenses you are entitled to claim as well as assist you in ensuring you have the appropriate substantiation.
As the ATO becomes more active in this area by combining their access to various streams of data as well as their ability to confirm information direct with employers, it is worthwhile individuals becoming more diligent in preparing their expense claims.
With the 31 October self lodgment deadline now past, why not contact us to assist you in preparing your income tax return. We can provide guidance in relation to the types of claims you can make and how to substantiate them to ensure you maximize your after tax position and you can avail yourself to our tax agent lodgment extension deadline which may save you late lodgment penalties. Call our team on 03 5221 6399 to make your appointment.