ATO Hit List for 2017
Uber drivers and AirBNB income earners and taxpayers claiming “dodgy” deductions be careful!
People earning extra income through sharing economy platforms like Uber and Airbnb can expect extra scrutiny this year.
Also under scrutiny will be inflated work-related personal tax deductions, deductions relating to investment properties, and working holiday-makers claiming to be residents.
If you’re in the sharing economy, driving an Uber or renting an Airbnb, the main thing to be aware of is that you do have tax obligations. The income earned needs to be declared and valid tax deductions can also be claimed to reduce that income.
The ATO can obtain taxpayers’ financial information from third parties such as the banks or the sharing platforms themselves, and can match that data with tax returns to identify people who aren’t complying.
The data enables the ATO to put together a picture of what a person’s assessable income should be. If something doesn’t look quite right, it will send up a “red flag” and the ATO will investigate further.
Taxpayers who have previously claimed work-related expenses that they couldn’t substantiate (“dodgy” deductions) should be careful this year. The ATO has a bit of a focus this year auditing work-related expenses they see to be excessive.
Being audited only happens in a minority of cases, so it’s not something that’s likely unless your claims are significantly out of line with a typical claim, but it’s probably not worth taking the chance.
The ATO does have very clear benchmarks about what people professions should be claiming. If your claims are significantly outside of the benchmark, increasingly they will ask for substantiation. The ATO can levy a penalty, anywhere from 25% to 95% of the unpaid tax, and charge interest, so it can work out quite expensive.
The ATO uses real-time data to compare taxpayers with others in similar occupations and income brackets, to identify higher-than-expected claims related to expenses including vehicle, travel, internet and mobile phone, and self-education.
It is a misconception that you can make a standard claim of $300 without having spent the money. You don’t need receipts for claims up to $300 but you must have spent the money, and be able to show the ATO how you worked out your deduction if asked.
Deductions for work uniforms are a common trap for employees. You cannot claim everyday clothes, for example, black pants and a plain white shirt, even if you only wear them to work, and your employer says you are required to wear them.
To be able to claim your uniform, it needs be unique and distinctive, such as a uniform with your employer’s logo, or be specific to your occupation and not for everyday use, like chef’s pants or coloured safety vests.
The general rules for claiming deductions are:
You must have spent the money yourself and not have been reimbursed
The claim must be directly related to earning your income
You need a receipt/record to prove it.
The ATO has also warned it would be paying close attention to rental properties located in popular holiday destinations around Australia, after last year identifying a large number of mistakes regarding holiday homes.
There’s no problem with property owners using their rental property for a holiday, but as a holiday home owner you need to remember you can only claim tax deductions for expenses made during a period when the home is rented out or genuinely available for rent.
If a holiday home is rented out at discounted or “mates’ rates”, you can only claim deductions equal to the amount of rent charged.
ATO data matching allows the ATO to identify incorrect or suspicious claims and if the property location is one likely to be used as a holiday home.
According to the ATO, these are the things you probably can’t claim:
Trips between home and work. Generally, you can’t claim a deduction for these because they’re considered private travel.
Car expenses for transporting bulky tools or equipment, unless
you need to use your bulky tools to do your job
your employer requires you to transport this equipment
there is no secure area to store the equipment at work.
Car expenses that have been salary sacrificed.
Meal expenses for travel, unless you were required to work away from home overnight.
Private travel, so if you take a work trip that includes personal travel you can only claim the work-related portion.
Everyday clothes you bought to wear to work (e.g., a suit or black pants), even if your employer requires you to wear them.
A flat rate for cleaning eligible work clothes without being able to show how you calculated the cost.
Higher education contributions charged through the HELP scheme.
Self-education expenses when the study doesn’t have a direct connection to your current employment — your future or dream jobs don’t count.
Private use of phone or internet expenses — only the work-related portion counts.
Upfront deductions for tools and equipment that cost more than $300. These can be claimed over a number of years by depreciation.