written by: Ritchie Cruz, Principal Director
Last week, the Australian Tax Office (ATO) sounded a stern warning to employees who were demanding “unusually high” work-related expense claims. But why is this so? Following the annual returns of 2014, the ATO had detected a common occurrence where employees were making high expense claims for mobile phones, computers and other electronic devices. Consequently, the claims that ran into millions of UDS were taking a toll on the ATO, thus affecting the operations of the Australian economy.
In view of the foregoing, the ATO has warned its employees against double dipping while making their annual returns and claims. Furthermore, the ATO has informed employee expenses that have already been reimbursed by the employer cannot be claimed as deductions. However, some of the expenses that will be given urgent attention as work-related expenses include overnight travel, use of computers and the transportation of bulky goods for office purposes.
The ATO has outlined three basic rules for claiming work-related expenses. This means that a deduction will only be allowed if an employee can prove that an expense was:
- Actually incurred. An employee must prove that they spent the money within the relevant income year. For example, a claim deduction for 2015 must have been incurred between 1 July 2014 and 30 June 2015.
- Satisfies the deductibility test. This means that the work related expenses must be income producing, and there is a nexus between the outgoing activities and assessable income.
- Aligns with the substantiation rules. This means that the expense must be related to an employee’s job, and the expense was incurred in the course of gaining income related to the job. Most importantly, the substantiation claims must be supported by written evidence such as receipts, bank statements and diary entries.
In conclusion, the ATO rules, cautions employees from making claims for expenses without providing supportive evidence, and apportioning claims for private expenses.
Below is a YouTube demonstration on how to get the deductions right.
