Deductions under the ATO microscope

Australian Taxation Office Commissioner Chris Jordan last week issued a warning to taxpayers claiming deductions they are not entitled to.  

Addressing the National Press Club, Jordan identified various deductions which the ATO believe are being incorrectly claimed.  The deductions include work-related expenses, motor vehicle travel, uniform expenses and self-education expenses.  These deductions are likely to come under the ATO’s microscope for 2016/2017 returns.  

Jordan also believes employees and self-employed taxpayers filing their own returns are significantly over-claiming.   As a consequence, people filing their own return should expect increased scrutiny from the ATO.  

As per the ATO, to claim a deduction:

• you must have spent the money yourself in the applicable financial year and were not reimbursed
• the deduction must relate directly to your income
• you must have a record to prove it, which must be kept for five years
• if the expense was used for private and work purposes, only the work-related portion is deductible.  

 Some tips for claiming deductions:

• Vehicle and travel – trips between your home and work are generally considered private. 
• Uniform – Both the cost of buying and cleaning occupation-specific clothing, protective clothing and distinctive uniforms can be deducted. 
• Self-education – the course can only be deducted if it has a sufficient connection to your current employment.

Please contact our office if you would like to discuss your tax deductions.