ATO’S warning against incorrect tax deductions
INCORRECT tax deductions for work-related car use are putting many Australians on a collision course with the Australian Taxation Office.
The latest ATO data shows that almost one-quarter of taxpayers claim car deductions despite many not being entitled to do so.
The ATO is issuing a fresh warning as its technology becomes more sophisticated at catching cheats.
Even the 5.4 million people who already have lodged returns this year risk getting caught if they made dodgy car claims.
“There’s ongoing evidence that people are making mistakes in their work-related car expenses,” ATO assistant commissioner Kath Anderson said.
She said the highest number of workers claiming car-related deductions were managers, sales and marketing employees, teachers, office workers and carers.
Many claim travel between home and work, which is generally not deductible. Some claim car use for transport of bulky tools when their tools are not bulky enough.
Others are potentially pocketing illegal deductions of up to $3300 by using the popular 66c per kilometre claim for travel up to 5000km that does not require a logbook.
They are claiming right up to the limit without showing how they calculated it.
“We have found that in a few cases people have considered it an entitlement,” Ms Anderson said.
“There’s no such thing as a free pass when it comes to deductions.
“People might think they have a few folders to carry and that qualifies as bulky tools, when in fact that’s not the case.”
Tax specialist Andrea Michaels, the managing director of NDA Law, said there were “some old wives tales about what you can and can’t claim”.
“People think that for picking up mail on the way to work they can claim their car but they can’t,” she said.
Ms Michaels said innocent mistakes would probably result in having to pay back the debt plus interest, but knowingly false statements — such as claiming for use of an employer’s car — “put you into a 75% penalty regime, plus interest, and their interest rates are pretty high”.
“If you are a cleaner and using your car, they will know the average car expenses for a cleaner, and if you are outside the average that will flag an audit.”
The latest deductions data shows that more than three million people made work-related car expense claims in 2015-16.
The ATO undertook 450,000 reviews of tax returns and people were forced to pay back $1 billion.
DRIVING THE MESSAGE HOME: Be sure to claim only what you are entitled to when making vehicle-related tax deductions.