The Australian Taxation Office (ATO) is gearing up for tax season, particularly focusing on the claims submitted by around 15 million Australians starting July 1. As taxpayers prepare to submit their income and tax details, the ATO is poised to scrutinise certain deductions closely, especially those linked to work-related expenses, working-from-home (WFH) claims, and additional income from side jobs.
### ATO’s Watch List for Tax Returns
Rob Thomson, an ATO assistant commissioner, has indicated that last tax season saw some “outrageous” claims that raised eyebrows. Notably, these outlandish claims included:
– A taxpayer attempting to deduct a haircut expense related to a two-day conference in Sydney.
– A truck driver seeking reimbursement for swimwear after a brief dip at a pool during a lunch break on the job.
– A mechanic wanting to claim $10,000 worth of luxury clothing, electrical appliances, and other non-work-related items.
– A real estate agent claiming over $30,000 for dental veneers.
Thomson pointed out that such claims might have been efforts to obscure other discrepancies, a reminder that the ATO will not tolerate misleading submissions.
### Trends in Tax Claims
Interestingly, two-thirds of taxpayers included some form of work-related expenses in their last year’s returns. Despite the majority being honest, research from Finder revealed that about two million Australians have attempted to make false claims, with 90% of taxpayers compliant, while a small fraction—3%—failed to declare overseas income.
Thomson noted, “If your deductions don’t pass the pub test, it’s highly unlikely your claim will meet the ATO’s stringent criteria,” emphasising the need for connections between claimed expenses and income-earning activities, with proper documentation such as receipts or invoices.
### Side Hustles Under the Microscope
Given the ongoing cost-of-living crisis, many Australians are seeking additional income through side hustles, ranging from rideshare driving to renting out properties on platforms like Airbnb. Mark Chapman, a director of tax communications at H&R Block, warns that the ATO has extensive data sources to monitor these earnings. He stated, “The ATO will view your side hustle as income, regardless of whether you perceive it as a casual hobby.”
Chapman urged those making extra income to fully declare their earnings, as any discrepancies detected by the ATO could lead to significant penalties.
### Claiming Expenses Responsibly
Taxpayers should be particularly careful to avoid “double-dipping,” wherein someone might claim the same deduction through different methods. This typically occurs with WFH and vehicle expenses. Australians have two options for claiming WFH expenses: a fixed hourly rate of 70 cents or a detailed account of all expenses incurred. The vehicle claim can either be a flat rate of 88 cents per kilometre or through detailed records of all car-related expenses.
The ATO has made clear that claiming both methods for the same expenses is not permissible. Thomson advised, “Understanding the specifics of your chosen method is essential to avoid any overlaps in claims.”
### Conclusion
As taxpayers start to prepare their returns, awareness of the ATO’s vigilant approach to deductions is crucial. Ensuring legitimate and appropriately documented claims will not only facilitate a smoother tax process but also mitigate the risk of complications with the ATO. With the rise in side income avenues, full transparency with the tax office is more important than ever.
