ATO issues warning on unusually high deductions
The ATO has issued a warning that they are paying extra attention to taxpayers claiming higher than expected deductions for the 2015/16 income year.
Assistant Commissioner Graham Whyte stated that the ATO’s ability to check work-related expense claims has become more sophisticated through use of technology and data analysis.
The ATO notes that taxpayers using myTax to lodge their returns will receive a real-time warning if their claims for work-related deductions are unusually high compared to other taxpayers in similar occupations, and recommends that in future income years taxpayers use the myDeductions tool in the ATO app to record their expenses to avoid the problems of lost or faded receipts.
As a general guide, the ATO have provided the following advice whereby taxpayers should ensure:
their claims are justified;
1. they have not already been reimbursed for the expenses by their employer;
2. they are getting good advice from their tax agents;
3. they have evidence to support their claims;
4. the claims are related to their work;
5. they know what is and isn’t deductible, and
6. they back up their data.
If you have any questions or enquires regarding your work-related deductions, please contact:
Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
“The ATO has issued a warning that it is paying extra attention to taxpayers claiming higher-than-expected deductions, using more sophisticated data analysis to check work-related expense claims.”
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Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
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Key Takeaways
The ATO is paying closer attention to unusually high deduction claims.
Improved data-matching and analytics allow the tax office to compare individuals’ claims with those of similar taxpayers.
Real-time warnings may appear during online tax lodgement.
If your deductions are significantly higher than peers in the same occupation, the system may flag this for you.
Work-related deductions must be directly linked to earning income.
The ATO expects clear evidence that claimed expenses are incurred in the course of earning assessable income.
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Frequently Asked Questions
Why has the ATO issued a warning about unusually high deductions?
The ATO is increasingly using advanced technology and data analytics to compare deduction claims across taxpayers and flag unusually large or atypical deductions for further review.
Which types of deductions does the warning relate to?
While the article focused on the 2015/16 year, the ATO’s scrutiny tends to centre on work-related expenses — especially those that are high relative to income or peer groups.
How might taxpayers receive a warning about their deductions?
Taxpayers lodging returns via online tools may see real-time warnings from the ATO if their claimed deductions are unusually high compared with others in similar occupations.
What should taxpayers do if they are making large deduction claims?
They should ensure all claims are justified, backed by evidence, directly related to earning income, and not already reimbursed by an employer. Proper substantiation and records are essential.
Does receiving a warning mean the ATO will automatically audit a taxpayer?
Not necessarily — a warning is a prompt to check and confirm that claims are appropriate before lodgement. However, consistent or unjustified high claims can attract further review.
What happens if someone’s deductions are unusually high when lodging via myTax?
Taxpayers using myTax may receive a real-time warning if their work-related deduction claims appear unusually high compared to others in similar occupations.
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