Posted on 14th August 2018 by Ashley Dawson

One of the main ATO audit targets for this tax season is work-related deductions.  The ATO is of the view that many taxpayers are claiming deductions for items that they have not incurred expenses for or are over-claiming their deductions.

To claim a work-related deduction, the expense must directly relate to earning your income, you must have spent the money yourself and weren’t reimbursed, and you must have a record of the expense as proof.  If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion.

The categories that fall within the work-related deductions are the following:

  • work-related motor vehicle
  • work-related clothing and laundry
  • other work-related deductions

For work-related motor vehicle claims, the ATO wants to remind taxpayers that generally travel between home and work, is considered private travel and therefore, no deduction is available.  Even if you are completing minor work-related activities on the way to work from home, such as collecting the mail, this is still considered private travel by the ATO.  However, you are able to claim the kilometres from home to work if you are required by your employer to carry bulky tools or equipment to use in your work which cannot be left at your workplace, such as an extension ladder or generator.

Last year around six million people claimed work-related clothing and laundry expenses, which added up to nearly $1.8 billion.  While the ATO acknowledges that many of these claims are legitimate, they are of the belief that half of the taxpayers in this category do not even wear uniforms, protective clothing, or occupation-specific clothing.

To claim a deduction for the purchase of a compulsory work uniform, a taxpayer must incur expenses on the purchase of a distinctive uniform that clearly identifies the taxpayer as an employee of the organisation, and the company has a strictly enforced policy that makes it compulsory for employees to wear the uniform while at work.  The difference for claiming a deduction for the purchase of a non-compulsory uniform is that the expenditure is only deductible if the uniform is registered with AusIndustry.  If your uniform meets these requirements then you are also able to claim for the costs of washing, drying and ironing the uniform.

In the 2018 Federal Budget the ATO was handed additional funding to increase audit and review actions on taxpayers.  So, it is highly likely that we will start to see more reviews and audits of taxpayers’ deductions in this area in the near future.

The ATO already has computer technology that is allowing them to compare deductions of taxpayers with the same job title and this software then allows them to select taxpayers who seem to be making excessive claims in comparison to others in the same field.

Incorrectly claiming or over-claiming could result in ATO penalties and/or interest so this tax season, if you are unsure of what can be legitimately claimed as a deduction in your income tax return, please contact our office to organise meeting with one of our accountants who will be able to help you.

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