20 Jun 2016-17 ATO Targets!
Each year, the Australian Taxation Office (ATO) draws up their ‘hit list’ of industries and tax payers who will receive special attention when they lodge their tax returns.
With the continued enhancement of reporting and integration of 3rd parties into the ATO’s platform, obtaining taxpayers financial information from banks or the likes of Uber and Airbnb, the ATO has more visibility and knowledge than ever before.
This information allows the ATO to look at the industry benchmarks and compare these once a taxpayer lodges their returns. If claims are significantly outside of the benchmark, it is likely the ATO will ask for further information and substantiation of the claims.
The ATO can levy a penalty of anywhere between 25 – 95 per cent of the unpaid tax, depending on the degree of culpability – in addition to the interest which is payable. This can work out to be quite expensive!
Being audited does happen, albeit in the minority of cases. If your claims are significantly out of line with typical claims, you are more likely to be audited.
Who are on this year’s hit list?
- If you have income derived from Uber and Airbnb
- Work Related Expenses
- Working Holidays
- Investment Properties
- Travel Related Expenses
- Properties in holiday locations
- Holiday homes
Assistant Commissioner Kath Anderson said the ATO was using real-time data to compare taxpayers with others in similar occupations and income brackets, to identify higher-than-expected claims related to expenses including vehicle, travel, internet and mobile phone, and self-education.
“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 said.
“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.”
Ms Anderson said with every return scrutinised, there were three “golden rules” for deductions. “One — you have to have spent the money yourself and can’t have been reimbursed, two — the claim must be directly related to earning your income, and three — you need a record to prove it.”
“Property owners should be aware that incorrect rental property claims will not go unnoticed,” she said. “Technology enhancements and extensive use of data is allowing us to identify incorrect or suspicious claims. We also have a good idea of the locations likely to be used for holiday homes.”
Earlier this month, the ATO warned it would be paying close attention to rental properties located in popular holiday destinations around Australia, after last year identifying a large number of mistakes regarding holiday homes.
“We’ve noticed some people are claiming deductions for holiday homes even where the property is not genuinely being rented out, or genuinely available for rent,” Ms Anderson said.
“There’s no problem with people using their rental property for their holiday, but holiday home owners need to remember they can only claim tax deductions for expenses made during a period when the home is rented out or genuinely available for rent.”
Deductions for work uniforms are a common trap for employees. “It’s a myth that you can claim everyday clothes, for example, black pants and a plain white shirt, even if you only wear them to work, and your employer says you have to,” Ms Anderson said.
“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.
“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 that adds up to a lot.”
Eleven Dodgy Deductions
According to the ATO, these are the things you probably can’t claim:
- Trips between home and work. Generally you can’t claim a deduction for these because they’re considered private travel.
- Car expenses for transporting bulky tools or equipment, unless: you need to use your bulky tools to do your job; your employer requires you to transport this equipment; there is no secure area to store the equipment at work.
- Car expenses that have been salary sacrificed.
- Meal expenses for travel, unless you were required to work away from home overnight.
- Private travel, so if you take a work trip that includes personal travel you can only claim the work-related portion.
- Everyday clothes you bought to wear to work (eg, a suit or black pants), even if your employer requires you to wear them.
- A flat rate for cleaning eligible work clothes without being able to show how you calculated the cost.
- Higher education contributions charged through the HELP scheme.
- Self-education expenses when the study doesn’t have a direct connection to your current employment — your future or dream jobs don’t count.
- Private use of phone or internet expenses — only the work-related portion counts.
- Upfront deductions for tools and equipment that cost more than $300. However, you can spread your deduction claim over a number of years. That’s called depreciation.
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*Adapted from the original published by Frank Chung of news.com.au