ATO tax deductions in spotlight as workers go wild

An opera-singing accountant claiming a $145,000 luxury car was among the crazy tax claims that aroused ATO suspicion. See the list of rejected deductions.

An opera-singing accountant and youth worker claiming a $145,000 luxury car are among the wacky tax deductions the Australian Taxation Office has knocked back recently.

Less than two months before tax time, workers and other taxpayers are being urged to start thinking about deductions but be careful to play by the rules.

ATO assistant commissioner Tim Loh said every year the ATO saw people claim “work-related expenses that are clearly not deductible”.

Farm hands had claimed the cost of groceries and medical expenses, he said, while an administrative worker claimed deductions for six different car despite only owning one.

Mr Loh said another incorrect claim came from an accountant who was looking to switch careers to become an opera singer. The woman claimed deduction “over $20,000 for opera gowns and a trip to Italy before she earnt any money from her singing career”, he said.

Tax time is less than two months away, so it’s wise to start planning now.

However, some seemingly crazy deductions are legally claimable for certain professions, such as clown suits, chef’s chequered pants, sunscreen and adult toys.

“What you can claim really depends on the job that you have,” Mr Loh said.

The ATO has free occupation and industry specific guides to help workers in 40 different industries work out what they can and cannot claim.

Chartered accountant and Mr Taxman Founder Adrian Raftery said he had seen incorrect claims for personal expenses such as “Botox, boob jobs and teeth whitening”.

Another dodgy deduction, suggested to a client by a dog breeder, was for a cute Cavoodle that was supposed to be a watchdog for a small home-based business.

“You would be put in the doghouse with the ATO if you dared tried to claim that,” Dr Raftery said.

He said people who tried to be too creative were “playing with fire”.

“You may get away with it once or twice, but eventually the ATO’s systems are that good that they will eventually find you, and when they do the penalties are severe.

“Don’t listen to mates for tax advice. Unless they are accountants, they are not tax experts. Speak to a registered tax agent.”

H&R Block director of tax communications Mark Chapman said his firm had seen a tradie try to deduct a European holiday as he was “researching his craft” looking at old buildings, a worker trying to claim the cost of cigarettes as stress relief, and an actor trying to claim a facelift.

Equally unusual but legally claimable were “tools of trade” for sex workers such as costumes, handcuffs and toys, he said.

“You can get some pretty strange deductions if you are a circus performer,” Mr Chapman said. A clown was able to deduct his costume and red nose, while a sword swallower could claim his sword as a tool of trade, he said.

Now was a good time to start checking receipts and invoices, and check deductions with a tax accountant, Mr Chapman said.

“The ATO has a real focus on work-related expenses … if yours are unusually high or in unusual categories, that’s bound to attract the ATO’s attention,” he said.