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ATO’s Strict Watch Over Tax Returns
As the Australian Taxation Office (ATO) prepares to oversee the submission of around 15 million tax returns starting from July 1, taxpayers should expect increased scrutiny, particularly regarding work-related and working-from-home expenses. ATO Assistant Commissioner Rob Thomson has indicated that specific claims will be closely monitored, especially for individuals maintaining secondary jobs or side hustles—numbers that approach one million Australians.
Noteworthy Claims
Last year, the ATO flagged some particularly questionable claims from taxpayers. These included:
- A Sydney conference attendee attempting to claim a haircut as a work expense.
- A truck driver trying to deduct swimming attire after a roadside pool stop.
- A mechanic who claimed luxury clothing, a TV, an air fryer, and other electrical goods totaling $10,000.
- A real estate agent claiming over $30,000 for dental veneers.
Thomson remarked that some of these claims were indeed "outrageous". Reflecting on the claims made last year, he revealed that two-thirds of taxpayers included work-related expenses, which are deductible if substantiated.
The Reality of Tax Claims
Research from Finder shows that while 90% of taxpayers act honestly, a small segment attempts to misrepresent their returns. Approximately two million people are estimated to have made dishonest claims, with 5% inflating deductions and 3% failing to declare overseas income. Thomson advises taxpayers to ensure their deductions are legitimate: “If your deductions don’t pass the pub test, it’s highly unlikely your claim will meet the ATO’s criteria." He emphasised the necessity for taxpayers to retain receipts and invoices that connect expenses to income-earning activities.
Impact of the Cost-of-Living Crisis
With the ongoing cost-of-living crisis, many Australians are turning to additional income streams, which might lead to unreported earnings. Mark Chapman, a contributor for Yahoo Finance and director of tax communications at H&R Block, warned taxpayers that the ATO considers these side hustles as earnings, countering the belief that casual gigs are merely hobbies. For example, income from platforms like Uber or Airtasker should be declared, as should any rental income from Airbnb style lodgings. The ATO utilises various data sources to identify discrepancies in reported income.
Avoiding Deduction Pitfalls
Taxpayers should also steer clear of double claiming for deductions. For instance, whilst one may claim a fixed hourly rate for home office expenses, additional deductions for specific items, like internet fees or office furniture, should not be submitted. The ATO permits you to choose between two calculation methods for home office and vehicle expenses—either a flat rate or a detailed log of costs and kilometres driven. For home office claims, the fixed rate is currently set at 70 cents per hour, while car expenses can be claimed at 88 cents per business kilometre.
Stay Informed and Compliant
Thomson cautioned taxpayers to familiarise themselves with ATO guidelines to avoid double dipping: “You don’t double dip the chip in the French onion dip at parties. Don’t double dip on the tax return.” It’s vital to gather and maintain thorough records to support any claims made in order to meet the stringent criteria established by the ATO.
By remaining informed and compliant, taxpayers can better navigate their duties while ensuring they claim only what they are entitled to without raising red flags with the ATO.
