The head of the Australian Taxation Office has warned consumers that unjustified deductions are “well and truly in our sights”.
Research shows that unjustified deductions – particularly those related to work – are the main cause of incorrect tax returns, according to ATO commissioner Chris Jordan.
“The results of our random audits and risk-based audits are showing many errors and over-claiming for work-related expenses – from legitimate mistakes and carelessness through to recklessness and fraud,” he said in a speech to the National Press Club.
“We are concerned about the large number of incorrect claims being made where record keeping requirements have been simplified – for example, $150 for clothing and laundry expenses and cents per kilometre method for car expenses.”
Cars and clothes causing confusion
Mr Jordan said that about 6.3 million people made claims against work-related clothing expenses during the 2014-15 financial year.
That would mean that almost half of Australia’s taxpayers were required to wear a uniform or protective clothing or had some special requirements for things like sunglasses and hats.
“While many of these claims would be legitimate, I wonder how many people have assumed that they can just claim $150 regardless of whether or not they have spent that amount on the required items?” he said.
“Similarly, we are seeing claims being made by individuals for car expenses where their employer informs us there is no requirement to use their car for work; or where their claims are excessive and made with the assumption that no explanation is required.”
The four golden rules of tax
Mr Jordan advised Australians to follow these rules when submitting their tax return:
- Declare all your income
- Don’t claim a deduction when you didn’t spend the money
- Don’t claim a deduction for private expenses
- Keep records to prove your claims
He also said the ATO would work hard to recoup unpaid taxes and “will be lifting our education, our support, our attention, our scrutiny and enforcement in this area”.