This year the ATO is using real-time data to compare taxpayers with others in similar occupations and income brackets, to identify higher-than-expected claims according to ATO assistant commissioner Kath Anderson.
“It is important to know what you’re eligible to claim before lodging your tax return and to make sure you don’t claim more than you’re entitled to. Many taxpayers don’t have a good understanding of what deductions they can claim, and believe they can claim for items which they in fact can’t,” Ms Anderson said.
“The ATO scrutinises every return. We have the technology and experience to detect non-compliance and we are continuing to catch taxpayers who are deliberately doing the wrong thing.”
Moore Stephens business advisory partner Matthew Free told Accountants Daily that SMEs have a number of common misconceptions about work-related expense claims and that his advice to businesses is “if in doubt, then ask the question”.
Mr Free said that common misconceptions exist around training and home office expenses.
“Self-education and/or staff training can be claimed either by the business as training or by the employee as a self-education cost, but only where the employee incurs the expense. The study must have the necessary nexus to the income currently being earned by the employee,” he said.
“For home office expenses, you can only claim a set rate per hour of usage to cover outgoings such as electricity and heating. Do not claim a percentage of mortgage interest or rent based on the size of the home office.”
HLB Mann Judd partner Peter Bembrick also spoke to Accountants Daily about claims where businesses often stumble such as insurance and business trips.
“While income protection insurance is an important tax-deductible item, other insurance premiums for TPD, trauma and life cover are not deductible,” he said.
“When you travel interstate or overseas you are allowed to claim the reasonable allowance rates for food, accommodation and incidentals. This amount is often overlooked and without substantiation you can claim up to the ATO rates published.”
Mr Free and Mr Bembrick have both seen some strange claims over their time as accountants.
Some of the less conventional but allowed claims Mr Free is aware of include Xbox consoles, Foxtel, ping pong tables and pool tables by businesses to boost team morale and efficiency, swords by professional sword swallowers, and make-up to prepare dead bodies by funeral parlours.