With annual tax audits being completed at the end of each financial year, it’s important to get your accounting done properly and avoid any sticky situations with the tax man. This year, the ATO is randomly auditing taxpayers claiming work related deductions.

What is the tax audit focus in FY18?

In February this year, the Tax Commissioner Chris Jordan confirmed that the Australian Tax Office staff have been undertaking random audits in relation to over-claiming on work related deductions. You may not think that a wrongfully claimed small deduction can make that much of a difference, however the Tax Office is taking this very seriously. While the research is not yet completed, the Tax Commissioner noted that of the $22 billion dollars claimed in work related expenses for the last financial year, up to $2.5 billion dollars may have been wrongfully claimed.

Where people are wrongfully claiming

When it comes to work related expenses, the largest number of incorrect claims have been seen in areas where record keeping requirements have been simplified (for example $150 for clothing and laundry expenses as well as the cents per kilometre method for car expenses).

With the goal of achieving a higher tax return, people are claiming the full deduction limit regardless of whether or not they have spent that amount on required items.

In addition, the Tax Office research has found that there were claims being made by individuals for car expenses where their employer has informed the Tax Office that there is no requirement to use their car for work.

Another identified problem area is where claims are excessive and made with the assumption that ‘no explanation’ is required.

Get your deductions right

If you are an employee, you may be able to claim a deduction for some costs related to your job. There are rules that you need to check and records that you may need to keep.

The taxation rules differ depending on your job and what the expenses were in relation to. The ATO has occupation guides for what you can and cannot claim depending on what you do that can be found at ato.gov.au/ occupations. Your accountant will be very familiar with these.

If you can claim a deduction for your costs you must still satisfy these three rules:

  1. You must have spent the money yourself and were not reimbursed by your employer.
  2. It must be directly related to your job and not a private expense.
  3. You must have a records to prove it (a physical receipt or electronic proof of purchase).

How to make sure you don’t get caught out

Doing your tax can be complicated. To help you get it right the ATO has started an education campaign which contains a wide range of useful information on their website. If you are still not completely certain that you can get it right, or you are worried that you may have got it wrong in the past then you should get in touch with your accountant; an expert when it comes to the complexity of tax law.

At Y.E. Ghaly & Co. our friendly staff can assist with all of your accounting and taxations needs, ensuring everything claimed on your behalf is in line with the Australian taxation regulations.