ATO focuses on Work-Related Expenses and Rental Claims

Since late times, ATO has noticed that there are higher-than-expected tax deductions which are related to the luxurious commodities. These commodities include the following things but are not limited to this: Cars, Electronic, Travel, and Rental Properties.

Every year, an approximate of 14 million Australians are lodging income tax returns. This also results in claiming tens of billions of dollars for tax deductions which turns out the highest amongst work-related expense claims and rental claims.

As per ATO Assistant Commissioner Karen Foat, she states that some make legitimate mistakes. However, many are making such dodgy claims deliberately to get a higher refund amount. He also stated that it seems like the taxpayers are unaware of the fact that if detected, this over-claiming of the tax refunds can invite them for a penalty.

The key primary themes that ATO is focusing to work on are over-claimed work-related expenses, rental expenses, and the pocketed people who deny declaring their actual income. According to the data analytics of ATO, more than 600 million transactions happen annually. This process also compares the taxpayer’s claims along with others on the same scale in similar job profiles.

There have been deliberate attempts recorded at ATO of overclaiming of the returns which are liable to attract penalties of up to 75% of the claims. The ATO is continuously reminding the employees for not getting a paper summary as a part of the Single Touch Payroll. He also stated that they are aware of the errors and incomplete data cases that will happen who are lodging in the initial days of July.

Ms. Foat also stated that there have been some examples of problematic claims wherein taxpayers initially claimed the mortgage interest bill for their rental property and refinancing & buying a boat or doing kitchen renovation in the home they are living in. However, there were reports that they still claimed the interest in the same rental property.

The other instance that they noticed and taken into consideration were that there were claims of capital works or capital assets in an income year but they need to be counted off over several years.

He said, “For example, somebody who has done up their bathroom in their rental property, that’s structural works and needs to be written off at 2.5% over 40 years. Or when it comes to assets – say you’ve got something like an air-conditioning system and it breaks down and you replace it – the cost needs to be claimed over the effective life of the asset.”

She also informed that sharing-economy services like Airbnb have not declared their overall income yet. From now onwards, ATO will closely scrutinize the income of the sharing-economy services such as Uber or Airtasker.

Some Unusual Claims: 2017-18

In the financial year 2017-18, an approximate of 7 million taxpayers claimed $16.5 billion in work-related expenses inclusive of more than 2.8 million Australians for work-related car expense claims totaling $6.2 billion.

In the same financial year, there were almost 4.5 lakh people who claimed a staggering $900 million in self-education expenses, which is considered to be ineligible. Also, there were almost 1.1 million individuals or so who claimed a total of $1.5 billion in work-related travel expenses in 2017-18. Almost 6 million people claimed $1.5 billion for job-related clothing expenses in 2017-18.

Additionally, there are claims of travel expenses like meals, accommodation, and commutation which has been already reimbursed by the employer. Some of the taxpayers also claim for the mobile expenses and internet plans which are being used partially. There have been instances of claims including rent, rates, mortgage interest, child support, family gifts, and medical costs.

Final Thoughts

These updates have always served as a nightmare to the tax agents who in turn provide the rest of the tasks to some suitable taxation services outsourcing.

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