We are mere weeks away from June 30, aka end of financial year, so it’s time to start creating a mental list of deductions you’re going to make.
However, before you start getting too creative with how you plan on reducing your taxable income be warned … the ATO is not having a bar of it and will be drilling down hard on those who inflate or flat-out make up deductions (cough).
The ATO now has fancy software which helps them do as such, explains Assistant Commissioner Kath Anderson, which works by “using real-time data to compare taxpayers with others in similar occupations and income brackets.”
If you’re looking to sharpen your finance knowledge, be sure to check out Bauer’s Financially Fit Females hub.
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“Many taxpayers don’t have a good understanding of what deductions they can claim, and believe they can claim for items which they in fact can’t,” she adds.
“Some taxpayers even think that you can make a standard claim of $300 without having spent the money. You don’t need receipts for claims up to $300 but you must have actually spent the money, and be able to show us how you worked out your deduction if asked.”
On that note, do yourself a favour by being cautious with the following 10 deductions, earmarked for scrutiny this year…
1. Trips taken between your home and workplace
Sorry folks, but getting yourself to work and back is up to you to pay for, not the government as it’s considered private travel.
While most of us know this, there are some taxpayers who will try to do the sneaky. Don’t take the risk this year, unless you want the ATO to go through your financials with a fine-tooth comb.
2. Transporting bulky goods to and from work
Given a big bunch of flowers on your birthday that were just going to be too awkward to handle on the train ride home?
Too bad, the ATO won’t cough up the cash for the Uber to your place. The only way you can claim for moving such items is if you needed the bulky tools or equipment to do your job, your employer asked you to move them, or there was nowhere secure to store them at your workplace.
“Take great care on this point,” warns Mark Chapman, Director of Tax Communications at H&R Block. “The ATO looks very closely at such claims and disallows lots of them.”
3. Meals eaten during work-time
As nice it would be for the government to contribute toward your lunchtime lasagna, it’s up to your to feed yourself on your own dime during normal work hours.
The only way you can claim for food is if you had to work away from home overnight, and your employer did not offer reimbursement for these costs.
“Each year, the ATO publishes lengthy lists of what it regards as reasonable amounts to spend on meals incurred on overnight trips,” says Mark.
“Provided you’ve claimed less than the amounts specified by the ATO, you don’t need to keep detailed records such as invoices and receipts. If you spend more than the ATO’s reasonable amounts, you must keep detailed records.
“This is an area that trips up many people with the ATO, who extensively audit these claims. Some people assume they can automatically claim the reasonable amounts specified by the ATO. That is not how it works. You can claim the amount you actually spent; the ATO reasonable amounts only dictate whether or not you need to keep detailed records.”
4. Your extended travel on a work trip
If work requires you to go to Melbourne for a couple days and you decide to stay a couple more to visit family, then the ATO will not allow you to claim for this portion of your journey.
Much like getting yourself to and from work, this is considered “private travel” and so it needs to come out of your own pocket.
Of course, you are allowed to claim for the work-related portion of the trip (as long as your work didn’t reimburse you for the travel), just make sure you have the documentation to back up your claims.
5. Your black work pants, suit or white shirt
You no doubt bought these clothing items specifically for your job because they were needed to fulfill the company’s uniform policy, but unless they feature a logo or are occupation-specific (such as a doctor’s coat) then the ATO considers these to be part of your everyday wardrobe and as such, you cannot claim for purchase or laundry costs.
“To legitimately claim your uniform it needs be unique and distinctive, such as a uniform with your employer’s logo, or be specific to your occupation and not for everyday use, like chef’s pants or coloured safety vests,” explains Kath.
“It sounds like a small thing, but we aren’t talking about small sums of money here. There are 13 million taxpayers, so if everyone over claims even $100 [for laundry and purchase costs] that adds up to a lot.”
6. Your fictitious laundry bill
While we’re on the topic of occupation-specific clothing and uniforms, if you cannot show how you worked out the cost of washing these items then you’re going to be hot water.
Writing down a flat rate and claiming laundry expenses of more than $150 are the ATO’s biggest red flags on this one.
Instead, you should have written evidence, such as diary outlining when washing or dry-cleaning of these clothes occurred, or receipts to the same effect.
The ATO considers $1 per load – this includes washing, drying and ironing – to be a reasonable deduction cost if the load is made up only of work-related clothing, or 50 cents per load if other clothing items are included.
7. Your HECS or HELP contributions
You cannot claim for your mortgage or car loan repayments, so thinking the ATO is going to allow you a tax break on paying back the debt you owe them for your university education is just wishful thinking.
The fact this debt is only indexed each year (that being, your accumulated HECS or HELP debt increases at the end of each financial year in line with increase in the cost of living, in order to maintain the debt’s true value) and is not charged actual interest throughout the year like a vehicle or home loan, is enough of a financial gift in the government’s eyes.
8. Your night-time or online course
Just because you want to learn how arrange flowers doesn’t mean the ATO will help you in your education quest, unless such a course will help with your current employment.
If you’re a nurse and you try to claim this it’s going to raise a red flag, but if you’re an employed florist trying to advance your skills then claim away.
You have to be currently employed in that role though – future or dream jobs don’t count.
9. Your extensive internet and mobile phone use
Many of us know that we can and should being claiming back the internet and phone costs incurred as part of doing our jobs – especially as our roles require us to use these items more and more and foot the bill out of our own pocket.
However the ATO doesn’t want to pick up the full bill either, and will take a good hard look at what you consider to be costs incurred as part of your employment and costs incurred from personal use.
Downloading 100 gigs worth of movies to keep the kids occupied throughout the year or racking up $400 in international calls while hubby is overseas is going to set off alarm bells with the ATO, so be careful or you’ll get pinged.
10. Your new pricey laptop, car or mobile phone
Although stores would have you believe you can buy an iPad or desktop computer before June 30 and list it as a deduction on your return to claim the full cost, that’s not technically true.
While you can make an instant deduction for items totalling up to $300, for anything more than that you will have to spread your deduction claim over a number of years, based on the life expectancy of the item – this is known as asset depreciation and applies to tools and equipment such as power tools, electrical and vehicles.
Kath Anderson’s three golden rules for genuine deductions:
1. “You have to have spent the money yourself and it can’t have been reimbursed.” If you were given money by your employer for a cost incurred you cannot claim it again as this is considered double-dipping.
2. “The claim must be directly related to earning your income.” If the item was required as part of your role, it can be claimed.
3. “You need a record to prove it.” Such a receipt, diary or log book.
So what happens if you do get caught out?
“The ATO can levy a penalty of anywhere between 25-95 per cent of the unpaid tax, depending on your degree of culpability, and there’s also interest, so it can work out quite expensive,” Mark tells news.com.au.
Hmmm … guess honesty really is the best policy.
