The ATO Will Be Cracking Down On Expense Claims – Here’s What You Need To Know
The ATO ain’t nobody’s fool, and this year, if you plan on making any work-related expenses, you better have the proof to back it up – they’re going over expense claims with a fine-tooth comb. Here’s what you need to know.
There was a great rumour doing the rounds earlier this year.
As the little bird told it, employees of the Australian Tax Office were to be found scouring the car parks of sporting venues like the SCG and MCG in search of ‘luxury’ utes such as the Toyota Hilux. Why? Because those vehicles benefit from an exemption from fringe benefit tax for ‘minor private use’ (including driving to and from work), which means if they were ‘at the game’, it would be proof their owners were using them for much more private use than they’d made out to the tax man.
Whether true or not (and the ATO says it’s not), it backs up the very real announcement made just last week that the focus of this year’s tax audit will be ‘Work-Related Expenses’, of which car travel and related deductions account for almost half.
So what does all this mean, and are you in the firing line? Let’s have a look.
What exactly is a deduction?
If you’re asking this question, the truth is – you’re probably safe from the tax audit, but in the most general terms: a deduction is quite simply a reduction of the total amount of your income that the government is entitled to tax. Usually achieved by way of expenses, deductions are – at their most effective – even capable of dropping you from one tax bracket into a lower one.
Specifically then, what are ‘Workplace Expenses’ and how can I claim them?
A workplace expense is the most common form of deduction and, in principle, it’s all very straightforward. To claim a work-related expense:
–You must have spent money yourself without being reimbursed;
–It must have been an expense related to your job; and
–You must have a record to prove it.
For example, if you have to wear occupation-specific clothing for your job (i.e. company branded gear, non-slip shoes for nurses or those chefs’ checkered pants), then you can claim both the purchase of those clothes and their cleaning as work-related expenses, so long as you (a) bought them yourself, (b) weren’t reimbursed for them and (c) you have the receipt to prove it.
Simple, right? Well, as always, exceptions and technicalities quickly rear their head.
A little of this, a little of that
In the case of those checkered pants, it’s a fair bet chefs aren’t wearing them anywhere else, especially not down at the pub or while doing the grocery shopping. As such, it’s easy to say they’re used exclusively for work. But what if those nurse’s non-slip shoes were kinda trendy, and he or she finds them to be the perfect footwear for some casual, well-gripped night outs on the town? All of a sudden that workplace expense becomes a percentage situation, in which you can only claim a deduction for the work-related portion of which they’re used.
And that, as they say, is the rub. At the end of every financial year, more than 8.5 million Australians claim $19.7 billion in work-related expenses, and while it’s all legal and legit, not everybody gets it right (on average the ATO contacts 350,000 Australians each financial year to address these kinds of omissions or errors), which is why the auditors are sharpening their pencils and unfogging their lenses.
Of that $19.7 billion in work-related expenses claimed by Australians each year, almost half of it – $8 billion to be precise – is claimed on car travel, with petrol costs coming in at number one.
No surprise, then, that it’s found itself the key focus of the ATO’s investigations for 2015-16. So what is claimable, and how do you make sure you get it right?
Simply driving to and from work is NOT, except in very rare circumstances, considered a work-related expense, so if you’re aiming to claim this one, DON’T.
The ATO website, however, offers a helpful list of circumstances in which you can claim, including driving:
–Directly between two separate workplaces – for example, when you have a second job;
–From your normal workplace to an alternative workplace (for example, a client’s premises) while still on duty, and back to your normal workplace or directly home;
–If your home was a base of employment – that is, you started your work at home and travelled to a workplace to continue your work for the same employer;
–If you had shifting places of employment – that is, you regularly worked at more than one site each day before returning home;
–From your home to an alternative workplace for work purposes, and then to your normal workplace or directly home; and
–If you needed to carry bulky tools or equipment that you used for work and couldn’t leave at your workplace – for example, an extension ladder or a cello.
NB: if you’re a performance artist who plays cello on top of an extension ladder, you’re definitely covered.
Covering your bases
The last thing you need to know, then, is how to ensure you’re covered in case the ATO does come knocking. Thankfully for this financial year they’ve made the rules a lot simpler.
To calculate the work percentage of your travel deduction, you can either use:
–A 12-Week Logbook, in which you maintain a travel diary showing the dates, places, times and duration of your activities and travel, along with written evidence of your travel expenses, such as invoices, receipts or other documents detailing the expense and travel allowance details; or
–The ‘cents per kilometre’ method, where you can claim up to 5000km worth of work travel by simply multiplying the number of kilometres travelled by 66c (Eg: if you travelled 2000km for work in your car, then 2000 x $0.66 = $1,320).
Is that it?
Well, mostly. In addition to work-related travel expenses, the ATO is also focussing this year on claims for mobile and broadband expenses, as well as individuals making claims in relation to rental properties, especially for repairs and maintenance, which aren’t actually covered.
Bottom line: keep records of anything you intend to claim as a workplace expense, speak to an accountant (which can be claimed in the following year’s tax return) and look out for on-the-rise cellist performers – they’re as talented as they are tax savvy.
Tom is a former IP-lawyer and host of ABC’s ‘The Roast’. He is currently a political satirist, film critic and writer who believes cereal is an anytime food. Find him on Twitter@tomglasson