Every financial year, the Australian Taxation Office (ATO) targets certain work expenses that people attempt to claim erroneously. Whether through genuine error or deliberate subterfuge, these dodgy deductions add up to millions of dollars in lost government spending - and they can land you in hot water with the tax man.
Here's everything coming under the ATO spotlight this year.
The ATO is warning unscrupulous taxpayers that its ability to identify and investigate claims that differ from the ‘norm’ is improving each year due to enhancements in technology and the use of big data.
It's now much easier to compare taxpayers with others in similar occupations and income brackets, to identify higher-than-expected claims related to expenses including vehicle, travel, internet and mobile phone, and self-education.
“It is important to know what you’re eligible to claim before lodging your tax return and to make sure you don’t claim more than you’re entitled to,” the ATO said in a statement.
"Many taxpayers don’t have a good understanding of what deductions they can claim, and believe they can claim for items which they in fact can’t. It sounds like a small thing, but we aren’t talking about small sums of money here. There are 13 million taxpayers, so if everyone claims even $100 over that adds up to a lot.”
This year, the ATO will be paying particularly close attention to false laundry claims. In 2018, approximately six million Australians claimed work-related clothing and laundry expenses totalling nearly $1.5 billion. This works out to around half of all taxpayers making a claim for clothing and laundry expenses which seems very off.
“You must have spent the money you are claiming on buying or cleaning eligible clothes," the ATO warns. "While you don’t need receipts for claims up to $150, we can ask how you calculated your claim. We may even ask your employer if you have a required uniform.”
Here are the other work expenses that you should be particularly careful with when filling out your tax return this year:
- Trips between home and work. Generally you can’t claim a deduction for these because they’re considered private travel.
- Car expenses for transporting bulky tools or equipment, unless: (you need to use your bulky tools to do your job, your employer requires you to transport this equipment or there is no secure area to store the equipment at work.)
- Car expenses that have been salary sacrificed.
- Meal expenses for travel, unless you were required to work away from home overnight.
- Private travel, so if you take a work trip that includes personal travel you can only claim the work-related portion.
- Everyday clothes you bought to wear to work (eg, a suit or black pants), even if your employer requires you to wear them.
- A flat rate for cleaning eligible work clothes without being able to show how you calculated the cost.
- Higher education contributions charged through the HELP scheme.
- Self-education expenses when the study doesn’t have a direct connection to your current employment – your future or dream jobs don’t count.
- Private use of phone or internet expenses – only the work-related portion counts.
- Up-front deductions for tools and equipment that cost more than $300. However, you can spread your deduction claim over a number of years. That’s called depreciation.
If you claim any of the above work expenses, it's imperative to keep detailed records and secure the backing of your employer. For example, the ATO expects motorists to keep logs of distances travelled for work and will also contact employers to corroborate expenses. Simply providing a fistfull of petrol receipts may not be enough to satisfy an audit.
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.
If you don't want an unpleasant phone call from the tax man, be honest — and keep your receipts.
On the flip side, there are many legitimate work expenses that you may not realise you're allowed to claim. Here are five unusual deductions that you may be legally entitled to claim.