The ATO is warning it will crack down on travel expenses this year.
THE Australian Taxation Office is setting its sights on dodgy work-related car expenses this tax time, warning that there will be no “free pass” this year.
ATO Assistant Commissioner Kath Anderson said taxpayers often trip up making claims they can’t justify, believing they are entitled to make a “standard” claim.
“Some people think they are entitled to a ‘standard deduction’ for car expenses, using the cents per kilometre method, but this is not the case,” Ms Anderson said in a statement.
“While it’s true that you don’t need written evidence for claims of up to 5000 kilometres per year, you do need to be able to show that you were required to use your car for work, and how you calculated your claim.”
More than three million people made work-related car expense claims last year totalling $8.5 billion, a “significant proportion” of which were “right at the limit that does not require detailed records”.
“While we have no issue with people using the cents per kilometre method and we expect that most claims at this threshold may be legitimate, but we are reminding people that there’s no such thing as a ‘free pass’ when it comes to deductions,” Ms Anderson said.
Car expenses incurred performing work duties are generally deductible, but trips between home and work cannot be claimed without a good reason, such as carrying bulky goods or equipment.
“If you make a claim for transporting bulky tools, you need to be able to prove you were required by your employer to take these items to work, and that there was no safe place to store them,” Ms Anderson said.
“It is also important to make sure you don’t double-dip. In other words, you cannot claim expenses that have already been paid by your employer, including salary sacrificing arrangements.”
She said the three “golden rules” were that “you have to have spent the money yourself and can’t have been reimbursed”, the claims “must be directly related to earning your income”, and you must have a record to prove it.
The ATO has released three case studies of taxpayers who were caught out last year for dodgy car claims.
In one case, a railway guard claimed deductions for travelling to and from work, basing his deduction on the fact that he carried bulky tools including his flag, safety vest, handheld radio, torch, instructions and timetables in his car.
The guard drew the attention of the ATO’s systems because his deductions were much higher than the average for people in his occupation. His employer told the ATO secure facilities were available on the premises, so transportation of equipment was his choice.
The worker was forced to pay back $2000 in tax owed plus interest.
In another case, an employee manager who claimed $3800 in car expenses was asked to verify that they owned the car and it was registered in their name. The ATO discovered the car was under a novated lease arrangement. The deductions were disallowed and the manager was hit with a penalty for double-dipping.
The third case involved a school crossing safety officer, who claimed car expenses for travel between home and work as he transported a safety sign in his car. On investigation, the school told the ATO the sign was securely stored on school property each day, so the expense claims were disallowed.
The ATO has released a work-related expenses quiz. It says the average score is 77 per cent, and one of the biggest areas of confusion was travel between jobs.
Last week, an ATO officer told a tax conference that scrapping work-related deductions would be like setting off a “nuclear bomb”. Australians claim about $22 billion annually, and the ATO Commissioner Chris Jordan has previously said a “startlingly” large number of people were effectively gaming the system.
Mr Jordan told the National Press Club earlier this year that while the individual amounts over-claimed were “relatively small”, the overall revenue impact was “likely to be bigger” than the $2.5 billion in unpaid corporate tax by big business.
Speculation has been growing that the government will move to scrap work-related deductions altogether in favour of a flat $2000 deduction in a bid to cut costs and reduce the complexity of the system, with work-related deductions increasing at three times the rate of GDP.
THINGS YOU PROBABLY CAN’T CLAIM
. Trips between home and work – unless carrying bulky work-related goods
. Car expenses that have been salary sacrificed
. Meal expenses for travel unless you were required to work away from home overnight.
. Private travel or private transport of bulky goods or equipment
. Everyday clothes to wear to work – such as a suit or black pants – even if your employer requires you to wear them
. Deductions for cleaning eligible work clothes without showing how you calculated the cost
. Higher education contributions charged through the HELP scheme
. Self-education expenses if the study is not connected with your current job
. Private use of phone or internet
. Upfront deductions for tools and equipment costing more than $300 each. These must be depreciated over time