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Members better be on the lookout when it comes to some of the dodgier client claims.
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Tax time try-ons won’t wash with ATO, says CA ANZ
06 June 2022
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Tax time try-ons won’t wash with the ATO is the message from CA ANZ this June as it relates a few cautionary tales from members “who have seen and heard it all”.
“Our members have reported some real doozeys over the years,” CA ANZ tax leader Michael Croker said. “Some funny, some creative, but all non-deductible!”
Mr Croker said accountants needed to be on the lookout because clients were always inventive.
“One tax agent had a client try to underwrite their pet expenses – arguing their pet pug was a ‘business mascot’ which ‘welcomed customers and staff’,” Mr Croker said.
“Another tax agent reported a client saying he was an ‘entertainment consultant’, trying to claim his video games and streaming services. He was actually a check-out worker at a well-known technology retailer.
“And perhaps not as altruistic as they thought, another person sought to claim travel to Cairns as a ‘gift or donation’ for tax deductible purposes, because they gave a blood donation.”
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He said the message to members was simple: “Play it straight, or you’ll land yourself in hot water with the ATO.”
To help cut through the chaos of clients’ dog-and-pony claims, CA ANZ has put together a seven-point warning list of things to watch out for.
- Work-related rapid antigen tests (RATs)
The government announced in February that COVID tests required to attend work would be tax-deductible, and the law was passed on 31 March.
The ATO would accept reasonable evidence of RAT expenses incurred before the law changed but after that receipts were needed, Mr Croker said.
Some no-noes: “A RAT needed to send the kids off to school, visit grandma in the old folks home or for holiday travel isn’t deductible,” Mr Croker said.
- Home office equipment
“Home office equipment and expenses can give rise to deductions where used to produce income,” Mr Croker said.
These might include a printer, desk, stationery and other home-based costs, with the possibility that some would need to be apportioned between work and private use.
For many who struggle to keep track of every item, the ATO’s shortcut method of claiming 80¢ an hour would be easier.
Mr Croker said it was worth warning clients: “Don’t try to sneak through your Netflix subscription, because that will raise a red flag with the ATO.”
- Self-education expenses
Self-education expenses on courses that directly relate to the client’s occupation are claimable.
“You can also claim for courses that result in, or are likely to result in, an increase [in] your income from your current employment,” Mr Croker said. “But deductions generally aren’t allowed for gaining new qualifications in a totally different occupation.”
- Work clothing and dry cleaning
Some claims are possible here, Mr Croker said, as long as there was written evidence that the clothing had been purchased, how much was spent, and cleaning costs.
“A deduction can also apply to costs you incur when buying, hiring or repairing clothing and footwear if it is specific to your occupation, or a compulsory uniform,” Mr Croker said.
- Donations
Mr Croker said accountants were often confronted with confusion about what claims were allowable.
“It’s great if you gave to charity but if that charity is not registered as a Deductible Gift Recipient and you don’t have a paper record of the donation, then don’t expect the ATO to be as charitable,” Mr Croker said.
“Some taxpayers contribute to worthy causes on Go Fund Me or similar sites – it’s unlikely you can claim that back.”
- Double-dipping
Mr Croker said a common mistake was for a taxpayer to claim a deduction for an expense already reimbursed by the employer. Watch out, he said, because the ATO is on to it.
“The ATO has a habit of contacting employers and verifying whether an employee with suspicious tax deductions actually paid the amount,” Mr Croker said.
- “Cost of living” claims
With increased cost-of-living pressures, Mr Croker said some Australians might be tempted to overclaim deductions in 2022.
“With petrol costing north of $2 a litre, many accountants are fielding questions about deductions for car running costs. Ditto for increased home electricity and gas costs,” Mr Croker said.
He said deductions needed to be claimed in accordance with tax law, not a client’s cash-flow requirements. And perhaps an advice session is really what they needed.
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