Adrian Abbott, of Sydney Tax Advisory, and Gregory Ross, of Eakin McCaffery Cox, discuss what taxpayers can do to ensure they correctly claim for work-related expenses. The ATO is going out of its way to keep taxpayers informed about what expenses they can claim, they write.
The ATO is targeting work-related expenses
This article covers work-related expenses, which in the 2017 year totaled a record $21 billion.
The Assistant Commissioner, Kath Anderson said:
“With so much money at stake, the community expects us to provide help where we can, not just take action when we see mistakes and errors”.
The ATO has gone to considerable trouble in establishing websites to cover those work-related expenses and deductions ‘you can claim’.
It has developed an App called ‘myDeductions’ as a tool for taxpayers to keep their records organized.
The ATO has provided a download link to Google, Microsoft and the App Store. Those links are set out below.
Work related expenses
Through the media and ATO websites, there has been a call to Tax Agents to claim only properly work-related expenses for taxpayers, or suffer the consequences.
The ATO is well aware of the practice of some Tax Agents, automatically to claim $300 work-related expenses in the taxpayers’ returns.
The Commissioner asserts that too many Tax Agents simply include the $300 deduction, which may or may not be a deductible expense for the taxpayer. The $300 is a ceiling, where written evidence is not required for the expenditure of that money. However, before a deduction is claimed: –
- the taxpayers must have spent the money and not been reimbursed by their employer,
- the expense must be directly related to earning income and,
- there needs to be a record to prove the expenditure, even though the Commissioner does not need to see the written evidence.
The $300 limit does not apply for car expenses and employee allowances for meals, transport, and travel.
On a separate issue, the $300 ceiling has been now in place for some years and in our view consideration should be given to increasing that ceiling to $1,000 at least.
In a subsequent article, we will discuss the rules on substantiation, which apply to work-related expenses above the $300 record-keeping requirement.
Written evidence: –
- Must be kept for a period of five years from the date of lodgment of the tax return.
- Must show the name of the supplier, the amount, the nature of the goods or services, the date the expense was incurred and the banking details reflecting the payment.
- If the document does not show the nature of the goods or services, then the taxpayer may note the nature of the expense on the document, provided that is done before the lodgment of the tax return to which the expense relates.
Deductions you can claim
The ATO has extensive website references to the major deductions claimable by individuals as work-related expenses (QC 31967).
These expenses include: vehicle and travel expenses, clothing and laundry expenses, home office expenses, phone and internet costs, self-education expenses, tools and equipment, Tax Agents fees, gifts and donations, personal superannuation contributions and many more.
In subsequent articles, we will concentrate on the most important of these work-related expenses, which are:-
- vehicle and travel costs and home office expenses.
The ATO for the convenience of taxpayers, has published a listing of occupations and give an indication of the type of deductions available, specifically for that particular vocation (QC 56706).
The list is extensive and includes teachers, the police, hospitality workers, truck drivers, retail workers, building and construction workers, nurses, flight attendants, and many more.
By way of example, the specific circumstances relating to police work-related expenses were summed up in the website as: –
“Common deductions include the cost of mending or cleaning your police uniform, union and professional fees, publications and self-education costs relating to your current employment. Unfortunately, you can’t claim a deduction for the cost of haircuts, grooming, weight loss programs orsupplies, even though they may be covered by specific regulations. You also can’t claim costs associated with attending social functions or fitness expenses unless your employment depends on maintaining a level of fitness well above ordinary police standards, such as special operations.”
So, you can see the lengths to which the ATO is going to ensure that taxpayers not only know their position, but can gain some certainty in doing the ‘right thing’.
The ATO is going out of its way to make it easy for taxpayers. It even provides many suggestions for using the tools provided: –
“Make sure you record your information on a single device throughout the year, because you can only upload once per financial year. Backup your data regularly in case your device is broken, lost or stolen.”
Who would have thought the ATO would go to such lengths to guide and counsel taxpayers?
The text of the paper is only a summary and discussion of particular facts and principles. It is not to be taken as legal or commercial advice as to any particular factual circumstances.
LLB, BEc, FCIS, FGIA, FCA, CTA
Chartered Tax Advisor
Sydney Tax Advisory
LLB Accredited Specialist
Government and Administrative Law
Eakin McCaffery Cox