ATO spills the beans on tax-time furphies

Calling on Australians to not “let the deadline be a dread-line”, the ATO has published some of the wildest claims it has heard for why tax returns were lodged late.

The tax office said its officers have “heard it all”, highlighting six examples:

1.       “My paperwork flew out the car window when I was on the way to see the accountant”

2.       Another late lodger claimed they had a condition that allowed them to work just 30 minutes each week, “so, I couldn’t lodge”

3.       A variation on the my-dog-ate-my-homework excuse, one late lodger claimed they couldn’t lodge on time because: “My accountant has gone to prison. He is working on it, but it’s taking longer than normal because he can’t access a computer”

4.       “My ex-wife burnt everything belonging to me, including all of my tax records,” raised eyebrows at the ATO

5.       One late lodger with a perhaps tenuous grip on the passage of time said he hadn’t lodged returns for the years between 2008 and 2015 because he suffered a back injury in 2016

6.       The final lodger called out had claimed he couldn’t lodge because his father had died recently. The ATO explained that it was sympathetic until it was revealed that the lodger had used the same excuse more than a year before.

Assistant commissioner at the ATO, Kath Anderson said that the upcoming deadline “shouldn’t be a cause for concern”, while drawing attention to the pre-fill and data-matching technology employed by the myTax software.

“With the majority of pre-fill information now available most of the hard work is already done, and it’s even easier if you have been recording your deductions using myDeductions on the ATO app.

“In most cases you or your registered agent only need to double-check the pre-filled information, include any work-related expenses and click submit.”

However, those looking to cash in on tax-time via work-related expenses should pay attention to the ATO’s warning last year.

At the time, assistant commissioner Graham Whyte said: “If we see a claim that appears to be unusual we will check it with the employer. Most people want to do the right thing, but we have seen mistakes, and even instances of people deliberately doing the wrong thing.

“The ATO wants everyone to claim the work-related expenses they are entitled to – no more and no less. To make it fair, we’re catching and penalising people that deliberately make incorrect claims.”

Explaining that in order to claim something as a work expense money needs to have been spent by the claimer and not reimbursed, the spending must be “directly related” to earning your income and there needs to be a record of it, the ATO shared seven lessons to learn from those making “dodgy deductions”.

1.       “Make sure your claims are justified”

The ATO pointed to a dairy farm employee who had claimed deductions of nearly $19,000 for travel, tractor hire, safety gear and tools, internet access and phone use. Upon calling the employee’s employer, the ATO discovered that he was not required to use his mobile or internet for work, he lived on site, did not require a tractor (even though one was provided) and the employer provided safety tools and gear.

2.       “Make sure you weren’t reimbursed already”

When a business analyst who travelled between Shanghai and Australia for work claimed more than $46,000 in travel expenses and provided receipts, the ATO contacted the employer who advised that the employee was reimbursed for all costs incurred during work travel.

“The analyst’s claims were disallowed on the basis that the expenses were private, incurred while he was at home in Shanghai, between trips to Australia for work,” the ATO said.

3.       “Make sure you are getting good advice”

In the third example, the ATO drew attention to a tiler who claimed over $4,000 in deductions relating to his car, travel and tools. However, when the office contacted the employer it was found that he was not required to transport any bulky equipment and that secure lockers were provided at the work site.

The tiler provided records of the expenses, but the ATO disallowed recompense for the car parts and all-day parking costs incurred at the workplace because: “They were private expenses, not directly related to earning his income”.

4.       “Make sure you have evidence to support your claims”

A sales consultant for a motor dealer in 2016 claimed more than $11,000 in car expenses, $3,000 in clothing and $24,000 for other work-related expenses. However, upon closer inspection it was discovered that she had overstated her car claims, falsely claimed clothing expenses and upon request for evidence, produced receipts for items like perfume, gift hampers, movie tickets and pillows.

“After discussion with the ATO, she agreed to reduce her clothing expense claims to nil. Her car expenses and other expenses were substantially reduced and she was asked to pay a tax shortfall of over $8,000 plus penalties,” the ATO warned.

5.       “Make sure your claims are related to your work”

In the case of a computer network engineer who claimed more than $4,000 in car, travel, clothing and other work-related expenses including the cost of managing his tax affairs, the ATO found that the car expenses related to both work and personal affairs, his clothing expenses were for general business wear and the tax-related expenses pertained to the management of the family trust.

“The engineer’s claims were disallowed by the ATO because they appeared to be of a personal nature and he was unable to substantiate his claims with written evidence.

“The ATO educated the engineer about his entitlements and record keeping obligations. He was grateful for the advice, agreeing to amend his tax return and be more careful in future years.”

6.       “Make sure you know what is and isn’t deductible”

The ATO’s sixth warning story featured a factory meat processing worker who claimed $12,800 in car, travel, meals, clothing, gear, tools and equipment expenses as well as expenses in the form of gifts, donations and the management of his tax affairs.

However, when the ATO prompted him to provide evidence of the expenses, the worker said he did not keep receipts other than for the donations which were automatically deducted from his pay.

“When ATO contacted his employer, they were advised that the worker was not required to travel for work purposes, either daily or overnight. The employer also stated that all protective gear and tools required to perform his duties were supplied by the company.

“The worker’s deduction claims were disallowed except for the gifts and donations which he was able to verify. The ATO advised the worker that travel between home and work, and meals consumed during normal work hours are considered private expenses and are not usually deductible,” the ATO added.

7.       “Make sure you back up your data”

A soldier in Canberra last year claimed $5,000 in gifts and donations and $1,500 in self-education expenses. However, he was unable to substantiate the claims as he said all his receipts were stored on his tablet as images. The tablet had fallen into the bathtub and no longer worked.

“We reminded the soldier to keep a backup of any receipts related to future claims. There is an option available in the myDeductions tool. We highly recommend you regularly back up your data in case you can no longer access data on your device – for example, if you lose your phone,” the ATO advised.  

ATO spills the beans on tax-time furphies

Lucy Dean

Last Updated: 16 October 2017 Published: 16 October 2017