It’s tax time, and the ATO’s tax deduction focuses for 2019 include the validity of suspicious work-related expense claims, investment property deductions and earnings from cryptocurrency and sharing economic platforms. This is part of the ATO’s crackdown to decrease the $8.7 billion ‘tax gap’ – an estimate of the difference between the amount the ATO collects and what would have been collected if every taxpayer was compliant. The ATO has been given additional funds by the government to increase intensity of addressing tax noncompliance. The additional funds will be primarily used to expand the ATO’s data-matching capabilities, as well as the number of audits performed and letters sent out about incorrect claims.
Assistant Commissioner Gavin Siebert said the ATO intends to “more than double the number of in-depth audits we conduct this year to 4,500”. If the ATO assesses your claims and determines they were deliberate attempts to over-claim, you may receive penalties up to 75% of the initial claim. If auditors find one suspicious claim, they are also likely to dig through as much of your digital data as possible to confirm you are eligible for the other claims you have made.
The three main areas of ATO’s tax deduction focus for the 2019 tax year are:
The most important factor when claiming work-related expenses is that all claims must be legitimately job-related. Some work-related expenses allow you to claim up to a certain amount on your taxes without substantiating the claim. The ATO has shown that many people claim just under, or right on, the threshold that would require them to show proof regardless of whether they have incurred the expenses. Ones to watch out for this year include:
- Claims for work-related clothing, dry cleaning, and laundry
- Deductions for home office use
- Overtime meal claims
- Union fees and subscriptions
- Mobile phone and internet costs (specifically those who are claiming the bill for their personal mobile as work-related)
- Motor vehicle claims where taxpayers take advantage of the 68-cent-per-kilometre flat rate available for journeys up to 5,000km regardless of how far they travel
- Incorrectly claiming deductions under the rule that allows taxpayers who have incurred work-related expenses of $300 or less in total to claim without receipts.
False Property Deductions
The ATO has announced a plan to double the number of audits focused on rental property deduction. Mr Siebert says “a random sample of returns with rental deductions found that nine out of 10 contained an error.” Last year’s audit of more than 1,500 taxpayers’ rental claims resulted in penalties totalling $1.3 million. This increase in audits hopes to catch out those intentionally making false claims, especially in the areas of:
- over-claimed interest
- capital works claimed as repairs
- incorrect apportionment of expenses for holiday homes let out to others
- omitted income from accommodation sharing.
Unreported Earnings from the Sharing Economy
The ATO will be using their data-matching technology extensively to track earnings made through cryptocurrency and the sharing economy. They will be carefully monitoring those who make money in these areas to ensure their income and expenses are correctly reported. Sharing economy jobs that will be examined include:
- transporting passengers for a fare (e.g. Uber)
- renting out parking spaces
- providing skilled services through sites such as Airtasker
- supplying equipment or tools
- completing odd jobs, errands or deliveries
- renting out equipment such as tools, musical instruments or sports equipment
- renting out a room or house for accommodation, especially through services such as Airbnb.
The most important thing to remember is that if you can’t substantiate something, you can’t claim it. Even if proof is not required to lodge the claim, having a receipt, invoice or bank statement that proves you incurred the expense is vital when it comes to verifying claims for the ATO. If you are not sure whether you can claim something, talk to a professional. A tax agent or accountant will be able to help you sort out which expenses you can and can’t claim come tax time. The experienced accountants at Arabon will be happy to help you. Call us today on 1300 ARABON or visit our website for more information.