ATO assistant commissioner Karen Foat has revealed that nearly 700,000 taxpayers claimed almost $2 billion of ‘other’ expenses last year.
Accountants Daily understands that a random sample of 400 of those ‘other’ expenses claims saw adjustments made to 88 per cent of them.
Last year, the ATO revealed an $8.7 billion individuals tax gap, with adjustments required for 72 per cent of its random sample of 868 returns.
With ‘other’ expenses, the ATO said it saw a mix of incorrect claims from self-preparers and returns lodged by a tax agent by refrained from giving a breakdown in figures.
“For self-preparers, the errors range from honest mistakes to deliberate over-claiming. In some instances, we have seen cases where a taxpayer has been dishonest with their tax practitioner about the legitimacy of expenses incurred,” an ATO spokesperson told Accountants Daily.
$1,700 in Lego and $24,000 for the cost of raising twins
The top five most outrageous claims seen by the ATO in tax time 2018 included a taxpayer attempting to claim $1,700 for the cost of Lego kits purchased for their children throughout the year.
Another saw a taxpayer trying to claim wedding expenses of approximately $58,000, claiming this was in relation to a work related overseas conference.
“He fraudulently claimed $33,087 in his return and $25,259 in his wife’s. This taxpayer was prosecuted,” said the ATO.
One taxpayer made a claim for “the cost of raising twins” totalling $24,000, while another claimed for the “cost of raising three children”, with one taxpayer stating “new born baby expensive” when making their claim.
Many taxpayers tried to claim the purchase of a new car, in the excess of $20,000, with one taxpayer attempting to claim $3,659 for a car purchased as a gift for their mother.
“A couple of taxpayers claimed dental expenses, believing a nice smile was essential to finding a job – and was therefore deductible. It isn’t and their claims were disallowed,” said Ms Foat.
“Where people make genuine mistakes, we simply disallow the claim. But when people are deliberately making dishonest claims, particularly for large sums, we will disallow the claim and may impose a penalty.
“We want people to understand what expenses they can claim and receive every dollar they are entitled to. But making incorrect claims that are personal or private take funding away from providing essential community services, and that’s not ok.”
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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.