ATO Assistant Commissioner Kath Anderson said a record $7.9 billion in deductions for ‘other work-related expenses’ were claimed by 6.7 million taxpayers last year, with the tax office noticing a rise in expenses related to working from home.
“There is a rising trend of employees working from home, and while extra costs related to working from home are usually deductible, we are seeing some taxpayers either over-claiming or claiming private costs,” Ms Anderson said.
“There is mounting evidence that many taxpayers don’t know what they can and cannot claim. In particular, we are seeing some taxpayers claiming expenses they never paid for, expenses their employer reimbursed, private expenses and expenses with no supporting records.”
While acknowledging that costs incurred as a direct result of working from home can be legitimately claimed, Ms Anderson said the ATO have noticed clients making wholesale claims to private expenses.
“One of the biggest issues we are seeing is people claiming the entire amount of expenses like their internet or mobile phone, not just the extra bit related to work. In reality, the rest of us are subsidising their private phone calls and internet usage, which is not okay,” said Ms Anderson.
“If working from home means sitting in front of the TV or at the kitchen bench doing some emails, it’s unlikely that you are incurring any additional expenses. However, if you have a separate work area, then you can claim the work-related portion of running expenses for that space.
“Employees cannot generally claim occupancy-related expenses like rent, mortgage repayments, property insurance, land taxes and rates.”
In one case study provided by the ATO, a tax agent helped lodge a return for a school principal who claimed $2,400 worth of home office expenses for electricity and phone use.
While able to prove to the ATO that the taxpayer was required to work from home outside school hours, neither the tax agent or client could demonstrate how they calculated the claim, with the tax office ultimately reducing the claim by 70 per cent and applying a penalty for not taking reasonable care when preparing the return.
Ms Anderson’s comments come after the ATO revealed that over $53 million in errors had been corrected in the first two months of tax time 2018, stemming from “simple mistakes” such as not declaring all income or over-claiming deductions.
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Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.