This Year's Dodgiest Tax Claims Revealed

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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.

[Via ATO]


Comments

    Pretty ironic for an institution that steals money for a living! It's like highwaymen naming and shaming victims for the ways they escaped them.

      Tax is not theft. It is how a modern society functions. If you have a problem with how your tax dollars are spent, take it up with the government, not the ATO.

      The only issue I'd take with the ATO is that while these "little amounts add up quickly", what adds up even quicker is the HUGE amounts rorted by the rich with their tax havens, and the big multinational companies. 6 billion stolen by mining companies alone. Though as this is technically legal, again, its the government we must look to. Fat chance of them doing anything when the PM himself happily stashes his cash in tax havens and the great mainstream rort that is negative gearing + CGT discount.

        "It is how a modern society functions"

        It's not how they run best, capitalism and free markets are all that is needed: this is proven by the Austrian school of economics. Political economies are always inefficient. Further, I consent to give 10% tax, the rest is coerced from me, which makes it theft.

          It's not coerced, you have many options available to you: you can move elsewhere, start another political party, lobby your local member, not purchase or use as many goods and services.

          The Austrian School's views are generally contested as being extreme and unrealistic but I think even Friedrich Hayek (the founder of the school) would say that governments are best equipped to deliver some goods: hospitals, schools, police forces, etc. The free market has historically been extremely reluctant to pay for any of these. So, in order to have these, we need taxes.

            Co·er·cion: 'the practice of persuading someone to do something by using force or threats.'

            It absolutely is coercion, government literally uses force (via police and courts) to ensure I pay. If I don't I can be fined, jailed, killed. Your reasons for why it isn't seems ridiculous, it's like saying to a victim you weren't raped, just stay away from that person (or all people in general), or try to change their rapist mind set.

            Re: Austrian School (AS), you have a point that their ideas were contested, Economists (of 50 years ago) generally preferred the mathematical toy models of the Orthodoxy, to the philosophical constructs of the Austrians, who rejected the mathematics of the time as insufficient to capture human economic behaviour.

            Unfortunately for the Orthodoxy, the application of better math machinery to test AS theory, especially with the emergence of Econo-physics, have (as I said) proved that the key elements were correct, and I mean "proof" in the stricter sense. So I can correctly claim that free markets are better than political economies, etc.

            Finally, it's economically rational for markets to not compete on services that a government already provides, it's called 'crowding out.' Consumers will usually rather free ride (it' not really free) on government services than pay for similar private services. Fortunately, if governments stopped providing these services (and people actually valued them) they would emerge. Don't worry, your roads would still be built, your rubbish still collected, your security still provided, etc. but better and for cheaper.

              I was taking the longer view, that you can do something about it if you choose to. But I get that in the mean time you will have to pay tax, and that is enforced if you choose to live in the country.

              I'd be happy to read the papers that have these proofs. I'd be intrigued to see what assumptions are being made, or not being made, in order to prove that the free market would freely provide public goods. Historical evidence would seem to contradict.

              Obviously, private enterprise is better at some things, like allocation and efficiency, but to definitively have it be better in ALL things seems implausible.

    That last one.... what was the guy thinking?

    I hope they refer some of these matters to the Police as well, knowingly manipulating a logbook will get you in serious trouble with Main Roads. As for the conference one, I wonder if he/she just created a fake invoice, or the conference people wrote them a fake one, if the latter, then there might be some seriously shady stuff going on with that conference.

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