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ATO: Real-Time Checks for Tax Returns and the Dodgiest Work-Related Deductions

Small business owners should be wary of filing the wrong work-related tax claims, as the Australian Tax Office (ATO) has introduced real-time checks for online tax returns for 2016.

Revenue adjustments of over $1.1 billion in income tax followed as a result of the ATO conducting about 450,000 reviews and audits of individual taxpayers in the 2014-2015 financial year.

Data analytics is used by the tax office to compare individual tax returns to those filed by taxpayers in the same situation. A review by the ATO staff is launched if a “red flag” is raised. Processing the returns can be delayed when this happens, and in cases where a person purposely claimed the incorrect amount, a penalty may be imposed.

For 2016, work-related tax deductions will be checked in real-time by the ATO. If claims are significantly higher than others in the same jobs, earning the same salary, individuals will receive a message requesting them to check their information.

This process is designed to help taxpayers make sure that they are filing claims correctly. People have nothing to worry about if they are not doing anything wrong. If you’ve committed a blunder, the tax office will help you fix it. You will not be penalised if it was an honest mistake.

The ATO from time to time comes across people who intentionally make incorrect claims. Examples include claims for auto expenses where log books have been fabricated and claims for self-education expenditures with invoices for conferences that the taxpayer didn’t attend.

It is important for business owners who prepare their own tax returns to be aware of what they are lawfully allowed to claim. They need to ensure their log books are up to date and that there is no confusion between personal and business expenses – on items like motor vehicle and home office expenditures.

Both the ATO and CPA websites offer advice on claiming deductions for free. And any person who is seeking professional advice should consult with a registered tax agent.

Dubious work-related expense claims spotted by the ATO

Here are five cases of individual taxpayers that the ATO calls “dodgy” work-related tax deductions:

  1. A “wine expert” filed a claim for thousands of dollars in expenditures related to a holiday in Europe, including cases of wine worth $9,000, on the premise that he went to wineries while travelling. All the deductions were disallowed after the employer said the claims were for personal expenses.
  2. A medical professional was heavily fined after filing a claim for costs incurred while going to a conference in America, when the truth was they were in Australia when the conference was on-going.
  3. A railway guard filed a claim of $3,700 in work-related auto expenses, which he said was incurred by him carrying large tools between his home and workplace. But the ATO found out from his employer that the instruction manuals and safety tools could be keep securely at the workplace. This led to the ATO disallowing the expenses because it was the employee’s decision to move the equipment.
  4. An individual who was attending a study program filed to claim deductions totalling $5,700 for leasing a property and $7,500 for renting a storage facility, on the premise that he was using both spaces for peace and quiet while studying as he couldn’t do this at home. The ATO disallowed the claims.
  5. The ATO disallowed a taxpayer’s claims for auto expenses after it was discovered that the kilometres stated in the log book were during the days when the taxpayer was overseas and the car had no record of passing through toll road areas.

Contact PJS Accountants for tax advice. We offer expertise in managing your tax affairs with a full range of compliance, corporate and individual tax services, whether you are a large company, SME, family business or individual. Tax laws and requirements change constantly, potentially putting you or your businesses at risk. Talk with one of our expert advisers now and ensure you are meeting your tax obligations.