Tax

ATO begins random audits to crack down on false workplace deduction claims

March 1, 2018

ATO commissioner Chris Jordan.

The head of the Australian Taxation Office has told a Senate estimates hearing there will be greater scrutiny placed on taxpayers workplace-related tax deductions, with auditors already knocking on the doors of Australian taxpayers.

Commissioner of Taxation Chris Jordan told the Senate Economics Legislation Committee on Wednesday evening that random audits reviewing “work-related claims” began 18 months ago.

Jordan said the tax office had found a number of errors through conducting the audits. Fairfax reports Australian Taxation Office (ATO) staff undertook the audits at the direction of senior management, after concerns over possible over-claiming of work deductions.

“We’ve done a number of random inquiries of taxpayers to sort of test some of these claims … and that has shown quite a diverse range of issues,” he said told senate estimates.

According to Fairfax, Jordan observed that while audits gave an indication of incorrect claims, education of taxpayers was going to be the most effective way of reducing work-related tax deductions.

Meanwhile, other senior ATO told Senate estimates that while there was no specific target for the amount of revenue to be recouped from the work-expenses crackdown, the ATO is also conducting broader audits to establish the “tax gap”, or the figure measuring the gap between what the ATO is entitled to collect in revenue, and what it is actually recouping.

These plans continue the ATO’s ongoing focus on taxpayers and businesses for inappropriately reporting deductions they are not entitled to claim.

In November 2017, Jordan told the Institute of Public Accountants National Congress the ATO would also be targeting unexplained wealth of small business owners. Six months before that, in a speech at the National Press Club in July 2017, Jordan said while the incorrect work-related claims of individuals were often small amounts, together they add up.

“While each of the individual amounts over-claimed is relatively small, the sum and overall revenue impact for the population involved could be significant – in the vicinity of, or even higher than the large market tax gap of $2.5 billion,” he said.

SmartCompany has previously reported on inappropriate workplace deductions, including a worker who attempted to claim more than $5000 in secretarial duties performed by his son who was seven at the time. In 2014-15, the tax commissioner said a questionably high $22 billion dollars was claimed in work-related expenses, suggesting workers were claiming more than they should be.

Founder of Healthy Business Finances, Stacey Price has previously told SmartCompany a bank statement is not enough to justify a deduction.

“You need to prove you have spent the money, and a bank statement alone is not necessarily proof of that,” she said.

When assessing whether you’re eligible to make a claim, Price says it depends on how you earn an income, and how the expense contributed to that.

“You just really can’t ask random, open ended questions of your friends about what they claim. What one person can claim is really not the same as the next person,” she said.

NOW READ: ATO signals crackdown on “other” work-related deductions, as Australians continue making “outright false” claims