With the Australian Taxation Office’s (ATO) renewed focus on individual and small business income tax returns, it is more important than ever for individual and small businesses to get their income tax returns correct and submitted on time. ATO tax commissioner Chris Jordan told the National Press Club that in 2014-2015, Australians claimed more than $22 billion dollars for individual and small business work-related expenses. The Tax Office will be paying close attention to these claimed expenses this year. The Tax Commissioner believes that millions of Australians are incorrectly claiming work-related expenses such as clothing, laundry, travel to work, and home office costs.
Clothing and Laundry.
ATO has eyes on those taxpayers who over-claimed for uniforms and protective clothing. Some taxpayers reported their uniforms or protective clothes in their income tax returns, without legitimate reasons for doing so. Australians should be aware that only certain industries will have claimable higher laundry and clothing expenses, for example, some jobs like trade people, doctors and police officers normally pay for their protective shoes and clothes. However, people in such professions should keep relevant and valid records to show ATO.
Self-education study.
For work-related expenses, the ATO is looking at tax deductions claimed for self-education. You should be aware that self-education expenses must have a connection with your current employment, not possible and future employment. Sometimes, taxpayers mistakenly claim tuition or training fees for their future career or job. Also, even for those who are claiming their training expenses related to their current job, please be aware that the ATO indicated that too much spent on such training may increase the risk or possibility of an ATO audit.
Home Office.
Some people have frequently over-estimated their working hours at home to get extra deductions for their income tax return. The ATO now tries to identify and monitor those tax payers who deliberately over-estimate their working hours in home office. The ATO noticed that some taxpayers would like to work at home solely to meet the taxation criteria for working from home and thus obtain the taxation benefits, such as claiming electricity and heating expenses. Also, in relation to home offices, tax payers have claimed undue proportions of the Internet and mobile phone costs as business expenses. The ATO suggested that in relation to home office, internet and phones bills can only be claimed for the work-related portion. If the portion is higher than the reasonable rates in the industry, then you need to be able to demonstrate your expenses with diaries or other records.
Moreover, among a series of home office work-related expenses, travel to work is also facing greater ATO scrutiny. Many taxpayers lodged their own tax returns with many claiming deductions which are often unsubstantiated. Such individually lodged tax returns often involve a misunderstanding of the rules related to travelling to work expenses. Quite often they include mistakes related to claiming the distance from home to work, and over-estimating the distance between different work sites.
Conclusion.
It is important to keep in mind that ATO does not only want to reduce your deductions; it also wants to ensure that the taxpayers receive their full entitlements. Therefore, it is vital that you as a taxpayer maintain good work expense records or diaries and seek professional advice to maximise your legal deductions.
Kerri Dickman & Co. will help you to achieve the best possible result for your income tax return in keeping with the tax regulations.