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The golden rules for work-related tax deductions

The golden rules for work-related tax deductions

The Australian Taxation Office is cracking down on cheeky taxpayers, arguing that it’s not fair for tax-dodgers to expect others to fork out for the bill.

ATO assistant commissioner Kath Anderson has said that 2018 is the year in which the ATO shines a spotlight on work-related deductions that aren’t quite square.

Calling on Australians to keep their receipts for work-related expenses, Ms Anderson said these expenses are only deductible if they meet the three golden rules.

She explained, “Firstly, you must have paid for it and not been reimbursed, secondly, it must be directly related to earning your income and not a private expense, and thirdly, you must have a record to prove it.”


She said last year 6.7 million taxpayers claimed $7.9 billion in deductions for “other work-related expenses”, making an Australian record.

“It’s a significant amount of money and Australians expect us to ensure that people are not over-claiming,” Ms Anderson said.

“Many taxpayers make legitimate claims, but we are also seeing errors in some claims, and some taxpayers are making risky or outright false claims”.

While tax time is still months away, she said it’s crucial that Australians set up good habits and keep records of their expenses so that they have proof, noting that substantiation is one of the ATO’s key focuses this year.

“It’s important that you have a record of the expense and can demonstrate how you calculated your claims. Every year we disallow lots of claims because there is no evidence to prove the expense. Yet it’s so easy to keep an electronic record,” Ms Anderson said.

“And remember, if your expenses are for both work and private use you can only claim a deduction for the work-related portion,” she added, noting that the ATO sees many cases of people trying to claim private expenses as work-related.

This could be people who incorrectly claim both their private and work-related internet and phone expenses, or workers who claim total expenses for a work trip that also included a private holiday.

“These might not always be big amounts, but together they add up,” said Ms Anderson. “Plus, no matter how small, it’s not OK for someone to expect the rest of us to pay for their private expenses.”

Further, she said the ATO uses sophisticated systems and analytics to detect incorrect claims.

“If a claim raises a red flag in the system, we will investigate further. We have a range of strategies to make sure people pay the correct amount of tax, ranging from help and education through to audits and even prosecution for more serious cases,” Ms Anderson warned.

“This year we have reached over 1 million taxpayers to support correct reporting and address non-compliance around work-related expenses. So far these activities have resulted in adjustments of over $100 million.”

She suggested using the ATO app’s myDeductions function to keep track of and store information about work-related deductions, noting that of the tens of thousands who used it last year, 90 per cent said they would use it again.

The golden rules for work-related tax deductions
The golden rules for work-related tax deductions
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