TEMPTED to claim some extra sneaky deductions on your tax return?
Its probably not worth it. The Australian Taxation Office is cracking down extra hard this year on dodgy deductions, and has revealed the fates of five unlucky individuals who tried it on.
Australians claim over $21 billion in work-related expenses each year, and we want to support taxpayers to claim what they are entitled to no more, no less, ATO assistant commissioner Graham Whyte said in a statement.
Most Australians want to do the right thing, but we are seeing mistakes, and while the amounts at an individual level are relatively small, collectively the overall impact is significant. Thats why, it is important for people to get their deductions right.
From time to time we see people deliberately making incorrect claims. Weve seen claims for car expenses where log books have been made up and claims for self-education expenses where invoices were supplied for conferences that the taxpayer never attended.
Deliberately making incorrect claims is an easy way to get into some serious trouble. Its just not worth it.
The tax office has released five case studies of ordinary Aussies including a railway guard, a doctor and a rental property owner who were caught out this year for claiming dodgy deductions.
Last year, the ATO conducted around 450,000 reviews and audits of individual taxpayers leading to adjustments of $1.1 billion, including omitted income or over-claimed deductions.
Mr Whyte said taxpayers should be wary of tax agents offering special deals, inflating claims to generate larger refunds.
If it sounds too good to be true it usually is, he said. The ATO takes action against tax agents who make dodgy claims, but to protect yourself, make sure your tax agent is registered.
The tax office says it is using increasingly sophisticated tools and data analytics to identify suspicious tax returns, including claims that are significantly different to those made by taxpayers in similar circumstances.
When a red flag is raised, our staff investigates further and if your claims seem unusual we will check them with your employer, he said. If youve made a mistake, this will hold up the processing of your tax return, so its best to make sure you claim the right deductions from the start.
Mr Whyte said the ATOs new myTax online lodgement system, which has replaced eTax this year, now supported real-time checks of deductions.
If your claims are substantially higher than others in similar occupations, earning similar amounts of income, a message will appear, asking you to check them. This new process is just about helping you to make sure your claims are correct, he said.
If you are doing the right thing you have nothing to worry about. If you make an honest mistake we will help you fix it up and correct your tax return. We will not penalise you if you genuinely tried to get it right.
But, if you didnt make a reasonable or genuine attempt to get it right or are intentionally doing the wrong thing, you may receive a penalty.
He added there are three golden rules for deductions: One, make sure you spent the money yourself and were not reimbursed. Two, make sure it is related to your job, and not a private expense. Three, keep a record to prove it.
A spokeswoman for the ATO said the base penalty for making a false of misleading statement was a percentage of the shortfall amount. That percentage is determined by the behaviour that led to the shortfall amount.
For failure to take reasonable care, the base penalty is 25 per cent. Generally, you fail to take reasonable care if you have not done what a reasonable person in the same circumstances would have done, she said.
Recklessness will cost you a base penalty of 50 per cent. You are reckless if a reasonable person in your circumstances would have been aware that there was a real risk of a shortfall amount arising and you disregarded, or showed indifference to, that risk, she said.
And for intentional disregard, the base penalty is 75 per cent. You intentionally disregard the law if you are fully aware of a clear tax obligation and you disregard the obligation with the intention of bringing about certain results underpaying tax or over-claiming an entitlement, she said.
The base penalty amount can be increased or reduced if there are aggravating or mitigating circumstances.
CASE STUDY ONE
A railway guard claimed $3700 in work-related car expenses for travel between his home and workplace. He indicated that this expense related to carrying bulky tools including large instruction manuals and safety equipment. The employer advised the equipment could be securely stored on their premises. The taxpayers car expense claims were disallowed because the equipment could be stored at work and carrying them was his personal choice, not a requirement of his employer.
CASE STUDY TWO
A wine expert, working at a high end restaurant, took annual leave and went to Europe for a holiday. He claimed thousands of dollars in airfares, car expenses, accommodation, and various tour expenses, based on the fact that hed visited some wineries. He also claimed over $9000 for cases of wine. All his deductions were disallowed when the employer confirmed the claims were private in nature and not related to earning his income.
CASE STUDY THREE
A medical professional made a claim for attending a conference in America and provided an invoice for the expense. When we checked, we found that the taxpayer was still in Australia at the time of the conference. The claims were disallowed and the taxpayer received a substantial penalty.
CASE STUDY FOUR
A taxpayer claimed deductions for car expenses using the logbook method. We found they had recorded kilometres in their log book on days where there was no record of the car travelling on the toll roads, and further inquiries identified that the taxpayer was out of the country. Their claims were disallowed.
CASE STUDY FIVE
A taxpayer claimed self-education expenses for the cost of leasing a residential property, which was not his main residence. The taxpayer claimed he had to incur the expense of renting the property as he required peace and quiet for uninterrupted study which he could not have in his own home. This was not deductible.
In addition to the rental expenses, the cost of a storage facility was claimed where the taxpayer needed to store his books and study materials. They claimed they needed this because of the huge amount of books and study material associated with his course and had no space in his private or rented residence where these could be housed. This was not deductible.
The cost of renting the property was around $57,000, with additional expense of $7500 for the storage facility. The actual cost of the study program he attended that year was only $1200.