This blog has been updated to include information from a new report released 25/04/2018 by the ATO. Findings suggest the average individual work-related expenses claim increased, resulting in further examination into tax returns filed by individuals in 2018.


 

Work-Related Expenses Idea guy

Claiming “additional” work-related expenses won’t be the brightest idea you could come up with come tax time.

Work-related expenses from this year forward will be going under the microscope. The ATO has found that a substantial amount of tax returns are being filed with false or misleading work-related expenses. Some of the more common claims relate to car expenses, travel expenses, home office expenses, uniforms, and self-education.

You can start to understand the ATO’s scepticism regarding work expenses when you consider that half of Australia’s workforce claims they wear uniforms to work. This statistic is even more curious when you realise the cost of the average outfit for work isn’t claimable as uniforms.

If you are legitimately going to claim work-related expenses, you will need to consider the following:

  • The taxpayer must have incurred the expense in the year in respect of which the claim is made;
  • The expense must be work-related and not private in nature;
  • The expense must not have been reimbursed by your employer.

Even if you have an allowance from your employer, you will not be automatically entitled to a deduction. An expense will still need to be incurred (like actually purchasing work clothes)

 

Why are work-related expenses being targeted now?

In 2017, a parliamentary inquiry encouraged the taxation office to crack down on compliance, and review areas where individuals could abuse the system. When you look at the numbers year after year it’s not hard to understand why individual work-related claims are going under the microscope.

Taxation statistics for 2015-16 income year revealed that the average individual work-related claim had increased to $2,548 from the previous years $2,531.


Table 4: Individuals – selected deductions, 2014–15 to 2015–16 income years
Deduction 2014–15 2015–16
Individuals (no.) Average ($) Median ($) Individuals (no.) Average ($) Median ($)
Work-related expenses

8,624,669

2,531

1,040

8,627,122

2,548

1,123


 

Big deal right? It’s only $17 more than the last year and the cost of living (especially in a city like Sydney) is climbing as well. Unfortunately, the cost of living according to the ATO and parliament should have no implications on the pattern of increasing work-related claims.

If you are worried about being audited, here’s a word of advice: hang onto your receipts.

 

Work expenses which exceed $300

More expensive work-related claims will require written evidence as support for the claim. If your claim is above $300, this will be a requirement to make the claim. If your claim is less than that amount, you will not need to provide evidence initially. However, it is a good idea to keep records of your expenses to provide proof if you are called to do so. Claiming a work-related expense where no expense has been incurred is illegal, and could result in serious trouble for the taxpayer.

The ATO isn’t seeking to scare legitimate taxpayers into reducing their claims. If your claim is legitimate and can be backed by evidence you should seek the fullest claim possible. If there is doubt as to whether you are eligible for certain claims, it is best to contact a professional for advice.

 

Expenses that are only partly work related

Another issue concerning work-related expenses may occur where an expense is partly related to work. For example, a personal mobile phone may be used in part for work. The taxpayer should seek to claim a reasonable percentage of the overall cost. Be reasonable when considering the percentage of the claim. It helps to pretend like you are doing an audit on yourself, looking for red flags in claims that have been made on your return.

Note

If your employer has reimbursed you for any work-related expenses, those expenses cannot be legally claimed on your tax return.


Source: ATO.gov.au
https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2015-16/?anchor=info1#info1

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