The Tax Office has reported that in 2015/16, Australians claimed about $23 billion of work-related expense deductions, however, the ATO believe a significant proportion of this amount is the result of over claiming of expenses.
As a result, the ATO have stated that they will be monitoring higher than expected claims for cars, travel, clothing, internet, mobile phones and self-education expenses this financial year.
Assistant Commissioner of Taxation, Kath Anderson said, "This tax time, the ATO is looking at higher than expected work-related expense claims by comparing taxpayers with their peers in similar jobs, earning similar amounts of income. While larger than usual claims might be legitimate, it may cause the ATO to ask further questions and check with your employer."
Motor Vehicle Expenses
The most common work-related expense claims are for car expenses, which amount to more than $8 billion in claims each year. The ATO state that travel between home and work cannot be claimed unless your home is your employment base and you are required to travel to a different workplace to work for the same employer.
You must also demonstrate that you regularly work at more than one job site each day before returning home (e.g. a tradesperson) and you had to use your car to carry bulky tools or equipment. According to Anderson, "To get a deduction for carrying bulky tools it is not enough to simply choose to carry bulky tools or equipment, such as ladders, wheelbarrows and cement mixers, to work. To claim this deduction, you need to show your employer required you to transport all the tools or equipment to work (that is, you did not carry them as a matter of choice or convenience).”
In addition, you also need to show the equipment was essential to earning your income (that is, without the equipment, you couldn't earn your income), there was no secure area to store the equipment at the work site and the equipment was bulky and difficult to transport.
Travel – Meals and Accommodation
More than $2 billion of work-related travel expenses are claimed each year.
Taxpayers can claim car fuel and parking for work related trips outside their usual place of work, however, they can only claim costs for accommodation and meals if they are required to work away from home overnight. "You can't claim a deduction for any private component of work-related travel," Ms Anderson said. "Receiving an allowance from your employer does not automatically entitle you to a deduction. If you receive a travel allowance amount on your payment summary (group certificate) you must declare it as income, and you can only claim for the expenses you actually incur."
Internet and Mobile Phone
Taxpayers are not entitled to claim mobile phone and internet use that is for private purposes. The ATO will focus on the apportionment between private and work use. Ms Anderson said, "We allow a claim of up to $50 for work-related mobile phone and internet use without the need to provide detailed records. However, you still need to be able to demonstrate that you spent the money and were required to incur these costs for your job."
The ATO claims there has been a high number of falsely claimed deductions for work clothes and they will be watching this area closely this year. You can only claim deductions for clothing that would not be worn outside the workplace. For example, uniforms with company logos or protective clothing and gear. It is also essential that you personally purchased the item, to make it eligible for a deduction.
The ATO state, "You can also claim the cost of laundering these items but you must use a reasonable basis to calculate your expenses. You can't claim the cost of purchasing or laundering plain clothing, such as black pants or white shirts, or clothing that doesn't meet the above requirements even if your employer requires you to wear them."
Claims for self-education expenses (which amount to about $2 billion annually) must be related to current employment, not future or desired employment.
Assistant Commissioner of Taxation, Kath Anderson said, "You cannot claim a deduction for courses that do not have a strong connection with your current employment or a course that might help you get new employment, even if it is your dream job. You might be able to claim a deduction for work-related education expenses if your studies directly relate to your current job, such as upgrading your qualifications or improving specific skills."
Home Office and Work Equipment
Each year more than $7 billion in home office costs, tools, equipment and other items are claimed. Deductions for tools, equipment or other assets can only be made if they are used to earn income. Accessories such as a bag used specifically for work to transport a laptop, papers or other work-related items in doing your job can also be claimed. If you were required by your employer to work from home, you can only claim a percentage of your running expenses for your home office.
If you have any queries about the tax deductibility of your work related expenses please don’t hesitate to contact us.