June is synonymous with one very important calendar event – the end of the financial year.
Tax time is a boring chore for a lot of us but it can reap great rewards if you give it the proper attention. There are limits on what you can and can’t successfully claim in your tax return. But that hasn’t stopped some people from attempting to claim everything but the kitchen sink.
With that in mind, we spoke to Mark Chapman, Director of Tax Communications at H&R Block, to find out some of the weirdest things people have tried to claim at tax time.
What are tax deductions?
When thinking about tax deductions there are some general rules to follow.
According to Chapman, if you’ve incurred an expense as part of your work, you can claim it. This includes things like petrol for your car if you work as a taxi driver, or essential tools if you’re a tradesperson.
However, there are some things you cannot and should not claim come tax time.
Here are some of the weirdest tax deductions
H&R Block deals with the accounts of over 750,000 Aussies a year, so they’ve really seen it all when it comes to strange tax deductions. Here are some of the crazier claims Chapman has seen (many of which the ATO rejected).
Lifestyles of the rich and famous
“A high profile television personality bought a new suit each time he graced our screens (heaven forbid he should be seen wearing the same suit more than once).”
“Once he’d worn each suit, he gave it away to a charity shop. Not only did he want to claim a tax deduction for the cost of each new suit (which he claimed he was obliged to wear to maintain his personal brand), he also wanted to claim a further tax deduction for the donation to charity.”
So, why was it denied?
“Sadly for him, the ATO doesn’t allow deductions for the cost of conventional clothing, a category that includes business suits, even those purchased by TV stars. As for the donations – well, in theory, a donation to a charity is tax-deductible, but what is the value of a second-hand suit? Our dapper star couldn’t say because he didn’t have receipts from the charity, and without a receipt, there is no possible deduction.”
Another thing very important to the rich and famous – cosmetic surgery.
“A well-known fashion model had undertaken various cosmetic procedures to maintain her appearance. She argued that the work done was to maintain her career past the point that it would otherwise have faded out if she hadn’t had the work done. As such, she argued there was a clear link between cosmetic surgery and deriving her income.”
“It’s an argument that seems superficially compelling but it’s not one the ATO would agree with; so far as they are concerned, medical procedures are rarely if ever tax-deductible, no matter what the reason.”
For the record, that includes breast enhancements which, yes, some people have tried to claim.
That’s a no, according to Chapman.
“A tradie left Australia for a European trip. On his return, he tried to claim back expenses from his sojourn as ‘researching his craft’. Sure, he’d taken a few nice photos and brushed up his French but his craftsman skills weren’t noticeably advanced so the deduction wasn’t allowable.”
Cigarettes are bad for your health and your tax return
“We all know smoking is bad for you but those who indulge have been known to argue that it reduces their stress levels. On that basis, one taxpayer argued for a tax deduction for his habit as a form of ‘stress relief’. We sent that one up in smoke….”
But wait, it gets even wilder.
“You can claim sunscreen if you work outdoors and clothes to protect you from the elements can also be deductible where you work in a harsh climate.”
“But we drew the line with the client who wanted to claim sunscreen and an umbrella because his office forced him to go to the park across the road to have a smoke, where he was occasionally exposed to either sun or rain.”
Costumes and weapons
“A profession that can generate some very strange tax deductions is a circus performer. Not many people can successfully make a claim for a clown costume, but one client who did was a professional clown. The whole costume was allowable, including the red nose, as a work-related clothing claim.”
“Similarly, a professional sword swallower was able to claim the ceremonial swords used in his act.”
Can you claim a pet?
“In very limited circumstances, yes you can, both for the cost of acquiring the animal (the cost is depreciated over several years) and for the costs of keeping it (food, vet bills, etc).”
“The two most common scenarios where the cost of a dog is tax-deductible are farming (where an animal might be used to round up sheep, for instance) and security (where the cost of a guard dog to patrol business premises might be allowable). Other than that, forget it.”
“So, for the client who “occasionally” took his dog to work to guard his tools and equipment and on that basis tried to claim for the dog’s food, the claim was politely declined. How he guarded his tools and equipment on the days he didn’t take his dog to work, we never found out.”
Does your daily commute count as an “expense”?
Cough up for those petrol fees folks because the daily commute does not count as a work expense.
“Lots of people try to claim for the cost of travelling from home to work and back again. Usually, they are unsuccessful because the daily commute is regarded as private – not work-related – travel and hence not claimable.”
But Chapman did reveal one exception to the rule:
“The only exception is where you’re required to carry bulky tools and equipment and you have nowhere secure at work to store them. That exception didn’t apply to the hairdresser who tried to claim the daily commute because she had to transport her scissors and clippers, which might have been sharp but certainly weren’t bulky.”
Strange tax claims that were successful
A handful of tax claims that seem out of the ordinary can actually turn out to be successful if the job fits.
Here are some Chapman has seen that actually resulted in an acceptable tax deduction:
Adult performers can look at successfully making claims for items as diverse as dance lessons, hair care, oils, lingerie, costumes and “toys”.
“One client who travelled extensively for work decided to buy a caravan to provide overnight accommodation whilst working away, rather than paying for a hotel room every night. From a tax point of view, that stacks up to be deductible. But if you are in the same situation and also use the caravan for holidays, you’ll need to apportion the deduction between work use and private use.”
A very limited number of taxpayers can claim gym memberships. Amongst those who can are professional sportspersons, some police officers and some defence force personnel.
Also, consider some of the more unusual objects you might need for a job. For example, musicians can claim their instruments or actors may be able to claim performance coaching.
In some instances nowadays you can also claim the cost of rent or mortgage interest on a rental property.
Chapman said “If your job, for example, requires you to spend time away from home in a different city, rather than spending money on a hotel or motel, the ATO allows you to claim the costs of a rental property. You can only claim for the period that you spend in the rental property as a result of work; you can’t claim the costs of staying there over weekends or loaning the rental property to family and friends”.
Now that you’ve seen some of the things people can and can’t claim it should cross a whole lot of things off your tax to-do list. If you do still need a hand, check out H&R Block’s tax return checklist.
Don’t forget, the ATO is cracking down on a number of areas this year. You don’t want to get caught out like some of the clients above.