The ATO has warned it will be paying closer attention to the ‘other’ category of expense deductions this year.
The ATO has already targeted tax deductions on travel, clothing, self-education and home office expenses. Now they’re setting their sights on the “other” category, which includes Internet access, union fees and reference books.
The ATO is hoping the increased scrutiny will help claw back an estimated $2.5 billion lost to the federal budget each year by over-claimed business expenses. “We will continue to increase attention, scrutiny and education on work-related expenses for tax time this year,” a spokeswoman for the ATO said.
How to bulletproof your ‘other’ expenses deduction claim
To ensure your ‘other’ expenses deduction claim meets the grade this July you will need to:
- Check the items you’re claiming meet the ATO’s ‘other’ category criteria.
- Show the expenses are directly related to you earning income.
- Prove the expenses aren’t private or domestic in nature.
- Show the expenses aren’t an outgoing of capital or of a capital nature related to a capital asset.
- Prove you spent the money yourself and were not reimbursed
Mixing work with pleasure and balancing your books with a bank balance
An employee photographer has been denied deductions for travel expenses incurred when travelling with his family.
While it’s legitimate to claim for items purchased for both business and private use, you can only claim for the portion that is related to your business. You may find yourself in trouble if you don’t provide adequate records to prove it.
In the case of the photographer, the Association of Accounting Technicians (AAT) said the travel expenses were primarily incurred for the purposes of a family trip or holiday and were therefore non-deductible. The AAT also rejected the photographer’s use of bank statements to support his expense claims without the backing of invoices and receipts. “Evidence of the mere transfer of funds, be it by way of bank transfer or by any other means, is not sufficiently informative of the actual character of an expense,” they said.
Are you concerned about the clampdown on allowable expense deductions? The Developers’ Forum is the ideal place to look for financial advice and business support to ensure your next tax return is watertight.