ATO Crackdown on Work Related Expenses

Have you heard about the ATO crackdown on work related expenses in 2017/18?

So what does it cover, and what are the implications for you?

The much publicised recent “crackdown” includes:

  1. Motor vehicle claims
  2. Personal phones and internet
  3. Home office expenses

What is a legitimate work expenses?

How do you determine if a work expense is legitimate and won’t get you into trouble with the ATO?

According to ATO Assistant Commissioner, Kath Anderson there are three golden rules.

“Firstly, you must have paid for it and not been reimbursed, secondly, it must be directly related to earning your income and not a private expense, and thirdly, you must have a record to prove it,” Ms Anderson said.

To avoid been targeted by the ATO and/or to make sure you would pass an audit you need to ensure you have support – that is, appropriate documentation – for all your work related expenses.

What does the latest ATO crack down on work expenses include?

Stellar Accounts owner and CPA, Debbie Hoffman, has outlined what you can and can’t claim when it comes to work related expenses below.

1. Personal motor vehicle tax deduction

If you wish to claim a percentage of your personal motor vehicle costs as a tax deduction you MUST maintain a logbook for at least 12 consecutive weeks in one financial year which can be used for up to 5 years as long as your travel remains consistent.

If you do not maintain a logbook, you have the option to claim up to 5000kms at 66cents in the $ – if audited you will still be required to provide evidence to the ATO that you were required to use your personal vehicle for work purposes. Evidence may involve a letter from your employer confirming use of your personal vehicle was required for work purposes, details of work related trips etc.

If you are in a job that requires you to transport your tools to work or between sites, the ATO may require you also to provide a letter from your employer confirming this is required and also that there is no place at work or on site to lock your tools overnight.

If you cannot provide the ATO with the above, they are likely to disallow your deduction claims and you will have to pay back any refund plus possible fines.

2. Personal telephone and internet tax deduction

The ATO requires evidence of work use of your personal internet and telephone. They suggest maintained a 4 week log of work usage to confirm your deduction claim.

They will also likely require a letter from your employer confirming the use of your personal telephone and internet is required for work purposes.

3. Home Office Expenses

If you work from home or occasionally have to do work at home, you are entitled to a deduction of 45cents for every hour you spend working from home.

The ATO suggests maintaining a log of the time spend working from home as evidence to confirm this deduction and they are also likely to require a letter from your employer confirming that you are required to work from home as a part of your employment.

If you are unable to provide the evidence to support your deductions, the ATO will disallow your claims and you will have to repay any refunds plus possible fines.

Tips for Work Expense Evidence

One further thing, if you are relying on fading receipts to prove your expenses – if the ATO can not read the receipt they may disallow your claim. Start taking photos of your receipts and record them electronically. Some accounting software allows for receipts to be uploaded directly to them.

A word of warning from the ATO:

“If a claim raises a red flag in the system, we will investigate further. We have a range of strategies to make sure people pay the correct amount of tax, ranging from help and education through to audits and even prosecution for more serious cases.” – ATO Assistant Commissioner, Kath Anderson as published in this article on February 21, 2018.

Need clarification on what you can and can’t claim as work expenses? Speak to Stellar Accounts today on 0428 887 104 .

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