Whether you’ve made a genuine mistake in claiming your work-related expenses, or if you’ve deliberately done the dodgy; illegal deductions cost the government millions every year.
There are 13 million taxpayers, so if everyone claims a little bit more than what they’re entitled to, it adds up to a lot! With $21.98 billion claimed in deductions for work-related expenses last financial year, this is an area under intense review by the Australian Taxation Office (ATO).
These days it’s easier than ever to compare taxpayers with others in similar occupations and income brackets, and the ATO’s ability to spot claims that are out of the ordinary is always improving. Thanks to some big leaps forward in data technology, the ATO is getting better and better at catching people out each financial year.
Correctly claiming work-related expenses is really quite simple!
If you want to stay in the ATO’s good books while getting every dollar you’re entitled to at tax time, then there are 5 simple rules to remember:
1. You need to have actually spent the money yourself and not been reimbursed by your employer.
2. The expense must be relevant to your job.
3. You must keep records and receipts of every purchase you intend to claim.
4. Get the backing and support of your employer.
5. Seek the advice of a taxation specialist.
Now, let’s take a look at what’s coming under the ATO’s spotlight in 2019. Below is a list of the 11 work-related expenses to be extra careful with when completing your tax return this year!
1.False laundry claims
In 2018, around six million Australians claimed work-related clothing and laundry expenses totalling nearly $1.5 billion. Yes – billion! As this works out to be approximately half of all taxpayers claiming clothing and laundry expenses, the ATO reckons it seems more than a little bit off. Naturally, they will be keeping an eye out for false laundry claims in 2019. While you don’t need to provide receipts for claims up to $150, the ATO can ask you how you calculated your claim, and they may even contact your employer to ask if you required a uniform. If you claim a flat rate for cleaning your eligible work clothes, but can’t show how you calculated the cost – the ATO will be on to you!
2. Travel between home and work
If you’re required to use your car for work, you are entitled to a deduction for the travel costs which you incur whilst at work. This doesn’t include the cost of your commute from home to work, as this is considered private travel. There are some very limited circumstances where you might be able to claim this commute expense, but it’s best to speak to your tax accountant to ensure you get the maximum legal return.
3. Car expenses for transporting bulky tools or equipment
According to the ATO, you’re entitled to claim your car-related expenses for using your own car to perform work duties. This includes transporting bulky tools or equipment that your employer requires you to use for work. Whether it’s an extension ladder or a cello, you will only be eligible for this deduction if the equipment is required for the job (and weighs an excess of 25kgs), and there is no secure storage available at your workplace.
4. Car expenses that have been salary sacrificed
Remember rule number 1 for correctly claiming work expense? This applies to your car as well! You can’t claim a deduction for car expenses that have been salary sacrificed, or if your employer has reimbursed you for these expenses. Car-related expense claims account for about 40 percent of all work-related deductions, so needless to say, the ATO will be cracking down on this type of false claim.
5. Meal expenses for travel
If you duck into the drive-thru on the way to or from work, this is considered a private expense. If you try to claim these meals as a work-related costs, you’ll probably end up with an expensive ‘please explain’ from the ATO.
On the other hand, you will be eligible to claim meal expenses if you were required to work away from home overnight with available daily rates from the ATO to assist.
6. Private travel
Who doesn’t like to have a little fun on a work trip if you’ve got the time? Just keep in mind that you can only claim the work-related portion of your travel. People often get confused about this if they are receiving a travel allowance from their employer, but this does not automatically entitle you to a deduction. In fact, you must declare any travel allowance as income if it exceeds a certain amount.
7. Everyday clothes you wear to work
Did you purchase every day clothes, such as suits, shirts or black pants to wear to work? Even if your employer requires you to meet a certain dress code, you will only be able to claim for uniforms you had to buy, or clothes that can’t be worn outside of work (ie. occupation-specific clothing). Remember to keep you receipts if your claim for work clothes is over $150, or if your total claim for work-related expenses exceeds $300!
8. Higher education contributions charged through the HELP scheme
The Higher Education Loan Program (HELP) is an Australian Government loan program that helps eligible students pay their tuition fees. These loans are repaid through the tax system once you start working and earning over $45,881. Unfortunately, paying back your study loan is not a tax deduction, even if you required the education and qualifications for your current job. To make thing easier, however, your repayment rate will reflect your level of income.
9. Self-education expenses
Self-education and personal development is a wonderful thing. It’s great to dream big and start preparing yourself for your dream job or future business venture. However, if the study you wish to claim as a work-related expense doesn’t have a direct connection to your current employment, the ATO will not allow it. You also won’t be able to claim tuition fees that someone has paid on your behalf or home office expenses, among several other self-education costs. If it’s not something you have to do for your current work, then it doesn’t count as a work-related expense. If your self-education is related to your current job, here’s what you can claim.
10. Private use of phone or internet
With the internet being used for so much of our personal and work-related needs, it’s easy for the lines to be blurred when it comes to claiming deduction. However, only the work-related portion of your phone and internet usage counts. ABA Tax can help you figure out how much of your phone and internet usage was for work, and how much was personal.
11. Up-front deductions for tools and equipment
The ATO is keeping an eye on up-front deductions over $300 for tools and equipment. Unfortunately, you can’t write off your $2500 work laptop in one year. However, you can spread out your deduction claim over a number of years. This is known as depreciation, and it’s an important thing to keep in mind when making larger work-related purchases.
If you want to avoid a stressful phone call from the ATO, simply be honest and remember the 5 rules to correctly claiming work-related expenses rules. Now you have a pretty good idea of what you’re not able to claim as a work-related deduction, but there many legitimate work expenses that you don’t even realise you’re allowed to claim. This is why rule number 5 is so important!To make sure you get your maximum legal refund this year (minus he headache!), contact your friendly team of taxation specialists at ABA Tax today.