Dodgy Tax Claims result in Audits

The Ato has revealed 2016’s most dodgy tax claims

The ATO recently issued a reminder to all Australian taxpayers to ensure they get their tax deductions right and to avoid knowingly dodgy tax claims!Assistant Commissioner Graham Whyte advised “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,”.  He further noted …“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. That’s why, it is important for people to get their deductions right.  From time to time we see people deliberately making incorrect claims … Deliberately making incorrect claims is an easy way to get into some serious trouble. It’s just not worth it.”In 2014-15, the ATO conducted around 450,000 reviews and audits of individual taxpayers, leading to revenue adjustments of over $1.1 billion in income tax.Cases involved omitted income or over-claimed entitlements like deductions. This included people making claims significantly different to those made by taxpayers in similar circumstances.These days all returns are reviewed using increasingly sophisticated tools and data analytics developed by the ATO.  This means they can more easily identify, review and adjust returns that may omit income or contain over zealous deductions.So when providing us with your information to assist with the completion of your return, remember three key guidelines when it comes to your deductions -i) You must have spent the money on the expense, and must not have been reimbursed,ii) The expense must have a genuine, direct, connection with your job, and it must not be a private expense,iii) Keep records to prove the money was spent, what the expense was for and how it relates to your job.The dodgy tax claim examples provided by the ATO include –

Dodgy Tax Claims No 1

A railway guard claimed $3,700 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 taxpayer’s 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.

Dodgy Tax Claims No 2

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 he’d visited some wineries. He also claimed over $9,000 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.

Dodgy Tax Claims No 3

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.

Dodgy Tax Claims No 4

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 enquiries identified that the taxpayer was out of the country. Their claims were disallowed.

Dodgy Tax Claims No 5

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 $7,500 for the storage facility. The actual cost of the study program he attended that year was only $1200.