Slipping in a couple of dodgy claims on our personal tax returns is virtually a national sport but the Australian Tax Office has had enough of Aussies trying it on.
With the country burdened with a whopping $8.6 billion tax gap — the difference between the amount the ATO collects and what it could have collected if taxpayers didn’t over claim — the pressure is on to expose rorters, both accidental and deliberate.
The ATO’s bean counters have vowed to use all means necessary to keep their hands on as many of your tax dollars as possible.
And, while every tax return is combed for shady deductions, this year there are three key areas in its sights.
THE HIT LIST
Dodgy claims on work-related expenses make up a big chunk of the tax gap, according to Karen Foat, ATO Assistant Commissioner, who said it was an ongoing problem across all professions.
Car travel claims, in particular, are something people commonly get wrong.
“What we often see is that they are claiming for trips to and from work which you cannot claim unless it’s required to transport bulky equipment,” she said.
“If you are travelling between two workplaces or your work requires you during your work day to go out and attend certain appointments etc and use your own vehicle, that’s when you can legitimately claim car expenses.”
You also need to keep a record of your trips so you can prove they were work-related.
Claiming deductions on uniforms is another area that often trips up taxpayers. Last year, around six million people claimed on work-related clothing and laundry expenses totalling nearly $1.5 billion.
But Ms Foat said it was doubtful half of all taxpayers were required to wear uniforms.
The rules around what is and is not recognised as a uniform can be confusing, but a good rule of thumb, according to Ms Foat, was that it must be compulsory, distinctive or occupation-specific.
“Most people think that if you are required to wear black pants and white shirt or you need to wear a suit for work, they think they can claim that when in fact they can’t,” she said.
Last year a quarter of all clothing and laundry claims were exactly at the record-keeping limit. But don’t think that we won’t scrutinise a claim because we don’t require receipts.
Not declaring all of your income:
Sophisticated data analytics are used to scrutinise every tax return for dodgy claims.
But the ATO’s high-tech tactics don’t end there. They could also be quietly following you on social media to help spot if you are living beyond your means.
Photos of you enjoying expensive holidays, fancy cars and million dollar mansions can all be red flags worthy of further investigation for the ATO.
So if your declared income is $40,000 then you might be asked to justify how you managed to afford that five-star trip on a luxury yacht that got so many likes on your Instagram.
Over-claiming on rental deductions:
Rental property owners are also in the frame for the ATO this year with audits scrutinising rental deductions set to double after research showed errors in nine out of 10 returns.
In the 2017-18 financial year, more than 2.2 million Australians claimed more than $47 billion in deductions.
ATO officers will be combing a range of third-party data and information, including from accommodation booking platforms, financial institutions, property transactions and rental bonds to weed out rorters.
Ms Foat said rental property owners were entitled to claim interest on their investment loans but not if they refinanced and used the extra proceeds for personal use such as to buy a boat or something else.
There is also an issue with people putting in claims for the entire cost of capital works, such as a bathroom renovation, in a single year, rather than spacing it out over a number of years.
And, if you are renting out a property on an accommodation site like Airbnb, don’t think you will be able to get away with not declaring the income, because the ATO is watching.
“We can see if someone is likely to have had investment income from renting out a property and if that income doesn’t show up in their return then that’s a red flag for us,” Ms Foat said.
Those with holiday homes were also not able to claim expenses for a full year if they were living in the home for part of the time.
THE GOLDEN RULES
Keep your receipts – It sounds obvious, but more than half of all claims that are disallowed are because people have not kept their receipts.
To help you out the Australian Tax Office has an app that helps keep track of your deductible receipts through the year to make it easier when it comes time to lodge a return.
“At the end of the year if you are doing your own tax return you can simply upload that deduction information into your tax return or if you use an agent you can give them the file. It’s a really good way to keep the receipts, much better than a shoe box,” Ms Foat said.
You can’t claim it if you didn’t spend it – Despite rumours to the contrary, you can’t claim minimum deductions for expenses such as uniforms and laundry if you didn’t actually lay out any money.
The ATO won’t ignore claims just because they are small – The ATO has warned claims for deductions at the record-keeping limit that don’t require a receipt are still scrutinised.
Blaming the accountant doesn’t work – The buck stops with the taxpayer, so getting an accountant to lodge your tax return does not mean you won’t get into trouble for any dodgy claims.
“Tax professionals can only really base the information you’re providing them so people need to take some accountability for that,” Ms Foat said.