Don’t be a dummy with your deductions
The Australian Taxation Office (ATO) is warning taxpayers to avoid incorrect claims for work-related expenses at tax time this year.
Assistant Commissioner Kath Anderson said the ATO is using real-time data 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,” Ms Anderson said.
“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. Some taxpayers even think that you can make a standard claim of $300 without having spent the money. You don’t need receipts for claims up to $300 but you must have actually spent the money, and be able to show us how you worked out your deduction if asked.”
Ms Anderson said that deductions for work uniforms are also a common trap for employees at tax time.
“It’s a myth that you can claim everyday clothes, for example, black pants and a plain white shirt, even if you only wear them to work, and your employer says you have to. To legitimately claim your uniform, it needs be unique and distinctive, such as a uniform with your employer’s logo, or be specific to your occupation and not for everyday use, like chef’s pants or coloured safety vests.”
“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 over claims even $100 that adds up to a lot.”
Ms Anderson said the ATO’s focus is on helping taxpayers get it right in the first instance, but the ATO is also on the lookout for red flags to find people who are doing the wrong thing.
“The ATO scrutinises every return. We have the technology and experience to detect non-compliance and we are continuing to catch taxpayers who are deliberately doing the wrong thing.”
Ms Anderson says there are three golden rules for taxpayers to remember to get it right.
“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”
The myDeductions tool in the ATO app can help make keeping records easier, and at tax time you can send your deductions to your tax agent or upload them directly to myTax. This year myDeductions is available to sole traders as well as individuals.
The ATO also publishes a range of information on its website to help taxpayers figure out which of their expenses are deductible.
“If you are using an agent, you can also talk to them to make sure the work-related expenses that you claim are right,” said Ms Anderson.
11 deductions you (probably) can’t claim
Here’s a list of things you probably can’t claim on your tax return:
- 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
- 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.
The ATO website has lots of information about what you can and can’t claim as a tax deduction, visit ato.gov.au/deductions