Work-related expenses have been a priority item for the tax office for several years, but this tax time there will be significantly more investment in monitoring deductions.
“The ATO wants taxpayers to claim what they are entitled to. No more, no less. We know that most people want to do the right thing but the results of random audits and risk-based audits are showing many errors and over-claiming for work-related expenses,” an ATO spokesperson told Accountants Daily.
“In 2018 the ATO has increased its investment into work-related expenses and will be providing products, assistance, and messaging to help individual taxpayers and their agents to get it right,” the spokesperson said.
Activities will be specific to tax agents, particularly those with clients who have hefty lists of deductions at tax time. Some surveillance activities will be similar to what professionals saw in 2017, and some will be brand new.
“For example in 2017, to assist agents with the return preparation process, as part of our pre-filling service the ATO provided over 17,900 tax agents with messaging for over 730,000 clients where their clients' work-related expense claims for the immediate prior year were considered high in comparison with similar taxpayers,” the spokesperson said.
“For those agents making mistakes, we have shared our risk profile of their practice to facilitate discussion around what we are seeing. The work-related expenses risk profile compares the work-related expense claims of an agent’s client base with claims made by similar taxpayers. In 2017, we reviewed the return preparation practices and shared our work-related expense risk profiles with over 300 agents.
“For the relatively small number of higher risk agents who are gaining an unfair competitive advantage by deliberately submitting false WRE claims, we have a number of strategies to mitigate this behaviour and ensure there are personal consequences for these tax agents. We conduct audits of not only the clients of the tax agent, but the tax agent’s personal tax affairs and that of their entity.”
Tax agents generally feel the ATO’s crackdown is disproportionate to the levels of non-compliance, but commissioner Chris Jordan said surveillance shows professionals are contributing to illegitimate claims.
Late last year, Mr Jordan said about 900 audits showed tax agents are contributing to Australia’s individual tax gap through “carelessness, miscalculation and simple mistakes.”
“While these are small amounts in each case, when you add them, you end up with a very large figure. An aggregate, somewhat larger, than the large corporate tax gap that we released of $2.5 billion dollars,” Mr Jordan said.
You can also read about Chartered Accountants Australia and New Zealand's insight to work-related deductions compliance here.