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Don’t let the ATO scare you off work deductions

Jul 10, 2017

The Australian Taxation Office has been criticised for targeting regular hard-working Australians instead of multinational corporations, but an expert says taxpayers should not be deterred from claiming everything they are entitled to.

ATO commissioner Chris Jordan triggered waves of negative press when he told the National Press Club last week that his agency would target work deductions claimed by individuals.

To support this change of priorities, he cited the statistic that large corporates dodge an estimated $2.5 billion in tax a year.

Mr Jordan said this figure was probably dwarfed by the $22 billion claimed for work-related expenses in 2014-15, a substantial portion of which he said were “mistakes” or “fraud”.

The press bristled at this, given alleged tax avoidance by large companies like Google and Chevron.

High-profile business journalist Alan Kohler told The Australian: “Does he not understand politics? He’s going after the little guy. Politics dictates you go after Google.”

And tax accountancy firm H&R Block told the Australian Financial Review the crackdown was “misguided” because there was no evidence of widespread rorting by individuals.

However, tax expert Dr Adrian Raftery told The New Daily that the taxman’s speech was simply an annual warning designed to push down the level of deductions via the “fear factor”.

Regular working Australians should not be deterred from fully claiming what they are entitled to this tax year, the Deakin Business School academic said.

“It’s a traditional tactic of the ATO to make broad statements like this right when individuals are about to do their tax returns, and it has worked successfully over the years,” Dr Raftery said.

“What I get upset about is, many people who have legitimate tax deductions don’t claim the full amount because, using their words, they ‘want to stay under the radar’ – even though they don’t know what the radar means.

“Aside from the ATO reducing the fraudulent or extravagant claims, they also risk people who’ve got genuine claims who go ‘Oh, I don’t want an audit’. There’s a fear factor that’s created.”

The ATO has issued a statement saying that it will be using “real-time data” to compare taxpayers in similar occupations and income brackets to detect “higher-than-expected” work-related claims.

Dr Raftery said the ATO’s computer system was likely to flag taxpayers with work-related deductions in the highest 10 or 15 per cent of their occupation class.

“I would encourage everyone, if you’ve got a deduction there, if you’ve got the receipts and you used it legitimately for work purposes, then by all means claim it,” he said.

“Go to the boundary but don’t go over the boundary.”

Some of the deductions the ATO is targeting

  • Travel costs between home and work
  • Car expenses that have already 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 that are not specific to your profession (such as a suit or white t-shirt)
  • Higher education contributions charged through the HELP scheme
  • Self-education expenses when the study doesn’t have a direct connection to your current employment
  • Private use of phone or internet expenses

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