Here’s a great CPA Australia podcast discussing how the ATO is now focusing on individual’s work related expenses claimed.
Tax Commissioner Chris Jordan has stated that the over-claiming of work-related expenses is estimated at $2.5 billion.
In this podcast episode, Robert McDowall, partner at Arabon, Trisha Aventurado, Manager Public Practice Support Service at CPA Australia and Gavan Ord, Manager – Business and Investment Policy at CPA Australia, discuss what the ATO is doing about it, whether accountants should be auditing everything, and the ATO’s three golden rules for accountants and self-preparers when putting together work-related expenses.
The important thing to remember is that expenses must have been incurred by the employee. Too many people or their tax agents are claiming because they’re allowed to, not because the expense was:
- actually inured/paid by the employee.
- have substantiation records
- related to the work
High risk areas of concern, where the Australian Taxation Office suspects tax payers are claiming for work related expenses incorrectly are;
- Home Office Expenses
- Mobile Phone
- Clothing expenses including laundry
- Motor Vehicle claims
- Rental Deductions
Many people are apportioning the personal v work related deductions incorrectly without proper substantiation, the result being a tax return with over-claimed deductions. The Australian Taxation Office has arrived at these suspicions as a result of resent random audits of tax payers returns.
In order to substantiate expenses and deductions correctly, keep good records.
There are many ways to process your records, there’s even an ATO Expense tracker app, although the easiest way is to use your EFTPOS card then download the bank statement to a spread sheet.
When apportioning expenses such as rent, mobile phone, or internet, a 4 week diary must be used to return a work related percentage, the resulting percentage can then be used to apply to your actual expenses.
Car claims are the same as above if you want to use your actual receipts, except the diary is called a logbook and must be used for 12 weeks. The resulting percentage can be used for 5 years or up until you change that car.
If you don’t want to keep a logbook or track your car receipts, then you must accurately estimate your work related kilometers with a limit of 5,000 kilometers. The resulting kms x $0.66 will your allowable deduction.
For any queries on any of the above issues, or any other tax or accounting queries, call Nick Britton on 0410 184 596