As we are getting closer to the end of the financial year, we have had a number of client queries on what they can and can’t claim.
In a recent article published in the Australian (2 June 2022), they said as follows:
Pet pugs, Disneyland trips and high heel shoes are among Australians’ outrageous attempts at tax deductions, as accountants warn people to avoid the temptation to claim illegal expenses amid surging living costs.
Authorities are increasingly seeing people claiming private household expenses such as food, rent and transport, while others are double-dipping by claiming working from home expenses twice or other expenses that were reimbursed by employers.
Chartered Accountants Australia and New Zealand tax leader Michael Croker said some people had been claiming deductions for post-Covid family reunion flights as business trips, cosmetic surgery and even a football club family membership as “stress relief”.
“There were a few reports of people trying to claim a portion of their home groceries because ‘it’s expensive to live’,” Mr Croker said.
The article went on to say:
The ATO uses high-tech data-matching systems to spot illegal deductions, and people who claim incorrectly will be forced to repay the debt, plus interest, and also pay penalties between 25 and 75 per cent of the tax shortfall, depending on the severity of the cases.
The ATO is getting more sophisticated at data matching, and more recently, have been collecting data on the sale of properties, cryptocurrency, and share trades, in addition to other data matching processes. You can read more about it in these previous articles.
Remember, the Tax System is a Self Assessed system. So, the onus is on you to prove your claims. As a result, the ATO can investigate your claims, and request the receipts or the basis of the claim. That doesn’t mean that you have done anything incorrectly, but rather that you have the onus of proof. To assist clients with the funding of those costs in the event of an ATO audit or review, we have set up our audit review service:
The Australian Tax Office offers this:
ATO assistant commissioner Tim Loh said what people could claim would depend on their job. “If you are a chef, you can claim the knives, if you are a hairdresser, you can claim the scissors, and if you are Bob the Builder, you can claim the hard hat,” he said.
“The best thing to do is to check out our nearly 40 occupation guides which can help you work out what you can and can’t claim.”
“There are three golden rules for work-related deductions:
- They needed to directly relate to earning your income and not be private in nature.
- You must have spent the money yourself and were not reimbursed.
- You must have a record to prove it – ideally a receipt.”
“Any asset that costs more than $300 either in total or per item, such as a computer, can’t be claimed immediately,” Mr Loh said. “Instead, you can only claim the decline in value per its effective life.”
10 Wacky and Wrong Tax Deductions
- Expenses for a pet pug whose owners described it as a business mascot that “welcomed customers and staff”.
- 6000 rounds of ammunition were claimed by a shooting club member for “pest control”.
- Helicopter trips between hospitals were claimed by a doctor as work-related travel.
- A trip to Disneyland was claimed as “research” by an architect.
- A Fremantle Dockers Football Club family membership was claimed as “stress relief”.
- A child’s piano lessons were claimed as staff training.
- A swimming pool as “emergency water storage”.
- High heel shoes were claimed as protective equipment by a saleswoman.
- Camping gear claimed by a tradesman.
- Video games and streaming services were claimed by a retail assistant who called himself an entertainment consultant.
Source: The Australian 2 June 2022