ATO warns against incorrect claims for work-related expenses
The ATO is warning taxpayers to avoid incorrect claims for work-related expenses. Assistant Commissioner Kath Anderson noted that the ATO is using real-time data comparing taxpayers in similar occupations and tax brackets, which will enable them to identify higher-than-expected deductions claims.
The ATO notes in particular that:
- although receipts are not required for claims up to $300, it is a requirement that the taxpayer actually spent the money claimed, and taxpayers need to be able to demonstrate how they calculated a deduction of up to $300 if no receipts are retained
- it is not generally allowable to claim a deduction for everyday clothes even if the style of clothes is specified for the employer and the clothes are only worn for work – to qualify for an allowable deduction, the clothes must be unique and distinctive (eg a uniform with the employer’s logo) or specific to the occupation and not suitable for everyday use (eg chef’s pants or coloured safety vests)
- most employees will not be able to make claims for:
-
- travel expenses for travel between home and work
- car expenses for transporting bulky tools or equipment (unless the tools are needed for the job and the employer requires the employee to transport them)
- car expenses that have been salary sacrificed
- meal expenses for travel, unless the employee was required to work away from home overnight
- the private portion of a trip that is both for work and for private purposes
- private use of phone or internet expenses, or
- self-education expenses for future or “dream” jobs”
If you have any questions in regards to claiming work related deductions, please do not hesitate to contact us.
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au
“The ATO is increasingly scrutinising work-related expense claims to ensure that deductions are genuinely incurred for earning income and backed by proper records.”
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
The ATO is actively warning taxpayers about incorrect or poorly substantiated work-related expense claims.
The ATO is actively warning taxpayers about incorrect or poorly substantiated work-related expense claims.
To be valid, work-related expenses must be genuinely incurred for earning assessable income, not personal or private costs.
Travel between home and your regular workplace is typically considered private and therefore not deductible.
Proper record-keeping is essential — the ATO expects receipts, diaries, logbooks or other supporting evidence.
Lack of documentation is one of the leading causes of deductions being disallowed or reviewed.
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Frequently Asked Questions
Why is the ATO warning taxpayers about work-related expense claims?
The ATO is focusing on work-related expense deductions to reduce errors, incorrect claims and tax-gap leakage. Many returns include claims that don’t meet the strict criteria for deductibility or lack substantiation.
What makes a work-related expense deductible?
To be deductible, an expense must be incurred by the taxpayer, directly related to earning assessable income, not reimbursed, and supported by appropriate documentation or records.
Which types of work-related claims does the ATO often scrutinise?
The ATO commonly examines deductions for working-from-home expenses, motor vehicle claims, tools and equipment, uniforms, and other work-related costs — particularly where records are weak or deductions seem unusually large.
What happens if a claimed expense is incorrect or can’t be substantiated?
If an expense claim doesn’t meet the rules or proper evidence isn’t provided, the ATO may adjust the return, disallow the deduction, request further explanation, or in some cases issue penalties or interest on the unpaid tax.
How can taxpayers avoid issues when claiming work-related expenses?
Taxpayers should keep detailed records — such as receipts, diaries, logbooks or bills — and ensure each claim clearly relates to earning income; when unsure, they should refer to the ATO’s guides or consult a registered tax agent.
What is the ATO warning taxpayers about?
The ATO is warning taxpayers to avoid making incorrect claims for work-related expenses in their tax returns.
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