Rising cost of living no excuse for over-claiming tax deductions, ATO boss warns

Aussies struggling with soaring cost of living have been warned it’s no excuse to do this on their tax return, with the ATO watching closely.

Aussies struggling with the soaring cost of living have been warned it’s no excuse to over-claim work-related deductions on their tax return.

Australian Taxation Office assistant commissioner Tim Loh told the ABC any taxpayers thinking about over-claiming this year could potentially face a review or audit.

Every year about 8.5 million Australians claim around $20 billion in work-related expenses at an average of $3000.

In addition to dodgy work-related expenses, Mr Loh said the taxman would also be targeting Covid-related claims, rental deductions and people attempting to hide or downplay cryptocurrency investments.

Work-related travel expenses are expected to fall with more people working from home during the pandemic.

“What we are seeing from people is people continuing to claim current travel expenses at pre-pandemic levels,” Mr Loh said.

“We did see a bit of a decrease last year. But we do expect the current travel expenses to go down quite significantly because if you’ve been working from home, you can’t be at two places at once. The other thing we are focused on is laundry expenses. Obviously, if people have been working from home, [they would have not been] wearing their uniform.”

To claim things like rapid antigen tests, the worker must have paid for it themselves, not been reimbursed by their employer and it must have been for a work-related purpose.

“So, if you’re working out whether you can go with your mates to Byron Bay, that’s not going to be a deductible expense for that rapid test,” Mr Loh said.

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ATO assistant commissioner Tim Loh.

The ATO has previously warned that from July, people working from home must keep accurate records in order to claim home office expenses next year, as the popular 80-cent shortcut method is ending.

To be eligible for the shortcut method this year, taxpayers need to have worked from home and incurred some additional running expenses as a result, and have a record of the number of hours they worked from home.

That can be in the form of a time sheet, roster or diary.

“It’s rarely the best method to calculate your working from home expenses in terms of the size of the deduction but it does have the great virtue of simplicity,” H&R Block director of tax communications Mark Chapman told news.com.au.

“It rolls every working from home deduction – heating, cleaning, depreciation, mobile phone use – into one simple cents per hour rate.”

Mr Loh said for a person who has been working full-time at home for 48 weeks of the year, the total deduction using the shortcut method could work out to around $1500.

For those wanting to get a bigger deduction using either the fixed rate or actual cost method, the ATO warns to only claim the percentage of the expense used for work purposes.

“For example, for laptops, your mobile phone and your internet expenses, you can claim a deduction for that if you’ve used it for work-related purposes,” Mr Loh said.

“We see people try to claim 100 per cent of the expense when [they] for some of the time may [have been] using the internet for private purposes.”

Originally published as Rising cost of living no excuse for over-claiming tax deductions, ATO boss warns