Work-Related Expense Deductions under ATO Scrutiny

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In a recent speech to the National Press Club, Tax Commissioner Chris Jordan signalled that individuals and small businesses claiming excessive tax deductions will be under increased scrutiny. Thus, such a scenario highlights the importance of seeking guidance from a qualified tax advisor.

Mr Jordan said that more than $22 billion was claimed by individuals for work-related expenses in the 2015 financial year and that collectively the revenue impact of amounts over-claimed was likely to be more than the $2.5 billion in unpaid corporate tax by big businesses.

Examples of incorrect claims mentioned in the speech were those with simplified record-keeping options, specifically:

  • $150 for clothing and laundry expenses, which can only be a legitimate tax deduction if the individual is required to wear a uniform or protective clothing.
  • The cents per kilometre method for claiming car expenses is only a deduction if an individual needs to use their car for work and still requires some evidence (e.g. diary entries) to support the claim.

On their website, the ATO have a list of 11 deductions you (probably) can’t claim. The ATO says they use “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” to identify audit targets.

Mr Jordan has also signalled that rental property deductions also face closer examination.

The ATO does make similar announcements of their compliance priorities each year. You shouldn’t be afraid of claiming legitimate deductions.  The rules can be complicated, and if you doubt a particular deduction, we encourage you to contact your client manager.

Kreston Stanley Williamson Team

*Correct as of July 2017

Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.

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