ATO warning over common tax deductions that could trigger an audit: ‘Red flags’
Australians are being warned over common tax deductions that could set off red flags with the Australian Taxation Office (ATO). Tax time is officially here and many Aussies are looking for ways to maximise their refund and boost their deductions.
H&R Block director of tax communications Mark Chapman told Yahoo Finance there were serious risks for Aussies who were caught trying to exaggerate deductions or claiming things they weren’t entitled to. And it could actually make your tax bill bigger.
“The ATO can audit your tax return and disallow ‘dodgy’ or unsubstantiated claims. This will increase your tax bill,” he said.
“In addition, the ATO can charge interest on any unpaid tax and can levy a penalty of between 25 and 75 per cent of the amount of tax avoided, rising to 95 per cent if you are a frequent offender.”
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Trying to claim expenses that have no connection to your ability to earn an income, making big claims “out of kilter” with previous years, and making claims that are disproportionate to other taxpayers with similar backgrounds can raise alarm bells with the ATO, Chapman said.
As can unreasonably relying on “flat rate” deductions like the cents per kilometre for motor vehicle claims, and failing to apportion expenses between work and personal use.
You’ll also have to be careful of “double-dipping” expenses, like if you try to claim expenses that have already been reimbursed by your employer.
Here are six of the most common work-related expenses that can land you in hot water with the ATO.
1. Work-related car expenses
The cents per kilometre method lets you claim up to 5,000 kilometres at a set rate of 88 cents per kilometre. If you automatically claim the full amount, it could set off alarm bells.
“The ATO is concerned that some taxpayers are automatically claiming 5,000 kilometres without having proof that they actually undertook the journeys,” Chapman said.
“So, every time you use the car for a work trip, make sure to note down in a diary the number of kilometres you travelled and what the purpose of the journey was.”
Remember, journeys from home to work and back again don’t count as a work-related journey and generally can’t be claimed.
2. Work from home claims
You can claim work-from-home related expenses at a fixed rate of 70 cents per hour, but you’ll need to prove the number of hours you worked from home for the whole year, such as through a diary or your timesheets.
