With an additional $130.8m government funding injection, the ATO has signalled that this tax season it will target work related expense claims by individuals. Having recently conducted a pilot program where over 850 individual tax returns were audited, the ATO is convinced that when it comes to tax claims, taxpayers are overstepping the mark.
The main areas of concern are claims for home office, including claims for mobile phones and internet, as well as laundry and home to work travel, especially where relaxed recordkeeping rules apply (such claiming for a car based on kilometres travelled, or $150 for work clothing).
The ATO has signalled its intention to require taxpayers to prove that it is necessary for them to incur these expenses in order to earn income, even if there is no requirement to produce receipts. This may mean, for example, getting a letter from your employer to verify that you are required to use your car for work. Unlike other areas of the law, tax law puts the onus of proof on the taxpayer, not the ATO. In other words, you need to prove your case.
You’d think that the ATO would get more mileage from targeting the corporates instead of the little guy, but ATO sources suggest that at $8.7 billion, the gap in underpaid tax from individuals is more than three times the amount of tax foregone from large corporates. Over-claiming expenses is seen as a significant contributor to this problem.