The Australian Taxation Office (ATO) has named and shamed the dodgiest tax deductions it has received in 2016 thus far. Travel expenses and rental property deductions — which the ATO explicitly warned it would be targeting — feature prominently. If your claim wasn’t entirely honest (tch), you need to check out this list.
Every year, Australians attempt to claim approximately $21 billion in work-related expenses at tax time. And every year, a portion of said claims are blatantly taking the piss.
Taxpayers are supposed to claim what they are entitled to -- not what they can get away with. Over the past month, the ATO's accounting army has been busy weeding out thousands of people who got their deductions wrong -- either through a silly oversight, an honest mistake or a deliberate attempt to rort the system. If caught, the latter group faces particularly harsh penalties.
"Deliberately making incorrect claims is an easy way to get into some serious trouble,” explains Assistant Commissioner Graham Whyte. "We’ve seen claims for car expenses where log books have been made up and claims for self-education expenses where invoices were supplied for conferences that the taxpayer never attended.
"While the amounts at an individual level are relatively small, collectively the overall impact is significant. That’s why, it is important for people to get their deductions right."
In 2014-15, the ATO conducted around 450,000 reviews and audits of individual taxpayers, leading to revenue adjustments of over $1.1 billion in income tax. Most cases related to omitted income or over-claimed entitlements like deductions. Usually, the bogus or incorrect claims stood out like a sore thumb when compared to other tax payers in similar situations.
“Every tax return is scrutinised using increasingly sophisticated tools and data analytics developed by our ‘Data Doctors’ at the ATO," Whyte said. "This means we can identify and review income tax returns that may omit information or contain unreasonable deductions.
“When a red flag is raised, our staff investigates further and if your claims seem unusual we will check them with your employer."
To give people a taste of the kind of rubbish it regularly receives, the ATO released the following case studies on its website. If any of these claims look sheepishly familiar, you need to start worrying.
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 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 America and provided an invoice for the expense. When we checked, we found 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. We found they had recorded kilometres in their log book on days where there was no record of the car travelling on the toll roads, and further enquiries identified that the taxpayer was out of the country. 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’. They claimed they needed this because of the huge amount of books and study material associated with his course and 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 expense of $7,500 for the storage facility. The actual cost of the study program he attended that year was only $1200.
Remember: for a work expense to be claimable, you need to have spent the money yourself and not been reimbursed by your employer. Obviously, it must also relate to your job and you need to keep a record to prove it.