What is the ATO focussing on this year?
Work related expenses and the compliance program
The ATO will continue to focus on the following claims:
Self-education expenses (label D4)
Car expenses using the cents per kilometre method (label D1)
- When there is insufficient or no connection between those expenses and the work activities at the time the expense was incurred.
- Incorrectly claiming the cost of self-development courses where there is no connection with their current employment activities (eg, courses focusing on physical health, emotional health, goal setting and establishing personal wealth).
Home office expenses (label D5)
- Claiming car expenses using the cents per kilometre method without a basis to support the claim. Although you do not have to have written evidence, you do need to be able to show how you have calculated the business kilometres, for example, by keeping a diary detailing journeys made for work purposes. Claims using this method are restricted to 5,000 kilometres per vehicle eg you cannot claim 3,000 kilometres for employment activities and 3,000 kilometres for self-education activities, using the same car.
- People are also making incorrect claims for the cost of trips between home and work when the travel is outside normal employment hours, you are on call, or there is no public transport available.
Decline in value (label D5)
- Incorrectly claiming occupancy expenses where your home office is not a place of business eg, claims are made for interest on mortgage or rent paid, when the claim should be limited to the additional running costs, such as electricity expenses.
- Insufficient record keeping for calculating the running expenses of a home office (eg log book for four weeks). You should use a reasonable apportionment of actual costs incurred or use a fixed rate of 20 cents per hour for home office expenses of heating, cooling, lighting and decline in value of furniture.
- Incorrectly claiming deductions for the total cost of purchasing a computer rather than calculating a deduction for the decline in value over the effective life of the asset.
- Also neglecting to apportion deductions where an asset has been used in part for private purposes or was not available for use during all of the financial year.
- Not apportioning expenses like mobile phone calls, home phone calls and internet usage between business and private use eg a taxpayer keeps a diary for a four-week period showing that 20 of 100 calls made during the period are work related. As the work related use is 20%, only 20% of the cost of the telephone calls is an allowable deduction.
- Claims for sun protection items in 2002-03 and later years are not being substantiated in the same way as other items, even though they are subject to the same rules.
- Employees travelling for work purposes who do not receive a travel allowance are neglecting to substantiate their travel expense claims with written evidence.
- Employees travelling for work for six or more nights in a row must keep travel records showing the dates, places, times, duration, and nature of their activities. You must also keep written evidence of any overseas accommodation.
- Records of expenses for both employment and private purposes need to be kept to support the basis of any apportionment. Suitable records could include diaries or itemised accounts to support a claim for costs for work related use of a mobile phone.
- Mislabelling of deductions has been a common mistake. The ATO have advised taxpayers by letter if they notice any mislabelling of deductions when they review your return.
- Income protection insurance claims should be made at label D15. You cannot claim a deduction for a premium that was paid under a policy to compensate for things such as personal injury or death. If taxpayers cannot work out which part of the premium is paid for insurance against the loss of their income, they cannot claim any deduction for the premium.
What you need to do
- Make sure you have kept the appropriate documents to substantiate your work related expense claims and that you can produce the documents if selected for review.
- Contact us if you require further information or help with filling in your tax return [contact us].