CA ANZ Tax Leader Michael Croker said Chartered Accountants have seen and heard it all – but trying it on with the ATO is not a smart strategy.
"Some funny, some creative, but all non-deductible, our members have reported some real doozeys over the years,” Mr Croker said.
“One tax agent had a client try to underwrite their pet expenses – arguing their pet pug was a ‘business mascot’ which ‘welcomed customers and staff’.
"Another tax agent reported a client saying he was an ‘entertainment consultant’, trying to claim his video games and streaming services. He was actually a checkout worker at a well-known technology retailer.
“And perhaps not as altruistic as they thought, another person sought to claim travel to Cairns as a ‘gift or donation’ for tax deductible purposes, because they gave a blood donation.
“While these are a few examples of people getting creative with their tax claims, our advice as Chartered Accountants is pretty simple: play it straight or you’ll land yourself in hot water with the ATO.”
Mr Croker said there is often confusion around what you can and can’t claim at tax time – so Chartered Accountants put together a list of seven things you can claim this year.
“Our role is to guide Australians back onto the right path when it comes to what is and isn’t deductible at tax time – and drawing on experiences from some of our 131,000 members, here are some examples of what passes the test.”
Seven things you can claim at tax time:
1. Work-related Rapid Antigen Tests (RATs)
The Government announced in February this year that COVID-19 testing expenses are tax deductible for tests that are required when attending a workplace but the law wasn’t passed until 31 March.
“Hold onto your RAT receipts” Mr Croker said, but noted the ATO will accept reasonable evidence of your RAT expenses incurred before the law changed.
Mr Croker warned against claiming RAT deductions for family reasons. “A RAT needed to send the kids off to school, visit grandma in the old folks home or for holiday travel isn’t deductible. This could become a very messy tax compliance issue at Tax Time 2022.”
2. Home office equipment and expenses
“Remember that home office equipment and expenses can give rise to deductions where used to produce income.
"Your printer, desk, stationery and other home-based, work-related expenses can add up and make a real difference.
“But don’t try to sneak through your Netflix subscription, because that will raise a red flag with the ATO. And some costs may need to be apportioned between work and private use.
"If keeping track of each item of work from home expenditure is too hard, your accountant can help determine whether you can use the ATO’s ‘shortcut’ tax method to claim expenses at 80c per hour for each hour of working from home which is due to expire this financial year.”
3. Self-education expenses
“The COVID lockdown allowed some to embark on study designed to get work promotions or update skills. You can claim self-education expenses when the course directly relates to your occupation.
“You can also claim for courses that result in, or are likely to result in, an increase your income from your current employment. But deductions generally aren’t allowed for gaining new qualifications in a totally different occupation.
“It really does pay to learn what you can claim at tax time.”
4. Work clothing and dry cleaning
“A deduction can also apply to costs you incur when buying, hiring or repairing clothing and footwear if it is specific to your occupation, or a compulsory uniform.
“But remember, you may need to have written evidence that shows you bought the clothing, the amount you spent, and your cleaning costs.”
“It’s great if you gave to charity but if that charity is not registered as a Deductible Gift Recipient and you don’t have a paper record of the donation, then don’t expect the ATO to be as charitable.
“Some taxpayers contribute to worthy causes on Go Fund Me or similar sites - it’s unlikely you can claim that back.
“We know there can be some confusion at tax time around what can and can’t be deducted.”
6. Don’t double-dip on deductions
Mr Croker said a common mistake was for a taxpayer to claim a deduction for an expense already reimbursed by the employer.
“The ATO has a habit of contacting employers and verifying whether an employee with suspicious tax deductions actually paid the amount.”
7. Avoid the temptation to make a “cost of living” tax deduction
With increased cost of living pressures, Mr Croker said some Australians might be tempted to over-claim deductions in 2022.
“With petrol costing north of $2 a litre, many accountants are fielding questions about deductions for car running costs.
Ditto for increased home electricity and gas costs.
“Deductions need to be claimed in accordance with the tax law – so if cashflow is an issue, consider getting the support of a Chartered Accountant to help you this year not just for tax advice, but also to help you budget better.
“Getting a professional to help with your tax affairs is always a good idea. It also happens to be a legitimate tax deduction.”