Due to the large number of claims seen last year for clothing & laundry expenses, the Australian Taxation Office (ATO) will focus with the WRE claims for this coming tax time 2018.
According to Chris Jordan, the ATO Commissioner, almost half of the population claimed the $150 for laundry expenses which has to be related to either protective clothing or uniform. With Jordan’s assumption, they could not conclude that 50 percent of the population are actually wearing protective clothing or a uniform.
Following his public statement made, he stated that incorrect claiming was more prevalent in agent-prepared tax returns than the self-prepared tax returns. He stated that some agents display lack of competence, are outdated in practices and knowledge, while others are deliberately cheating the system.
As a result, the ATO will increase its attention in several areas as part of improving the integrity of the system this coming tax season, which will include the following:
- Undeclared income
- Unexplained wealth
- Incorrectly claimed private expenses
- Unpaid superannuation guarantee
- Cash-only businesses
In addition, the ATO will also focus again on work-related expenses which include the following:
- car and travel expenses
- clothing & laundry expenses
- home office
- conference costs
The ATO insisted that there are a number of cases related to tax practitioners where they over claimed work-related expenses for their clients. Mr Taylor reiterated that any agent found guilty for this practice will face sanctions from the tax practitioner board (TPB).
The TBP will issue the following actions should agents fail to comply with the Code of Professional Conduct.
- issue a written caution
- issue an order
- suspend or terminate a registration
This coming tax season, ATO reminds tax practitioners to be alert with their clients who are confused with their WRE entitlement.
The following are the golden rules of work-related expenses deductibility:
- The client must have incurred the expenses themselves – Incurred expense means that the employee paid for it and not reimbursed by their employer.
- The expense must be incurred in producing or gaining assessable income – The expense should be related to earning employment income and the amount cannot be:
- Capital in nature (example: taxpayer bought a new computer for work purposes – the cost is deductible over the number of years instead)
- Private in nature (example: childcare fees)
- Non- deductible under the law (example: penalties and traffic fines incurred during work trips)
- They have a record to prove the claim.
Remember that clients are not automatically entitled to claim any standard deductions. They should be able to show how they calculated their claims, which is why it is very important that they keep records on their expenses or provide evidence to prove their claims.
Clients may use the myDeductions tools available from the ATO app to track their deductions and keep accurate records including photos of receipts.