ATO warns copying and pasting work-related tax deduction claims could land Aussie taxpayers in hot water

Australian taxpayers wanting to save a bit of time by copying and pasting work-related claims from last year’s tax return could raise a red flag with the Australian Taxation Office (ATO), as the agency warns taxpayers to think twice before taking that route.

Tax returns from 2022 saw around 8.6 million Australians claiming nearly $21.6 billion in work-related expenses, with just under 5 million people claiming a working-from-home related deduction last financial year.

Nearly 3 million people claimed work-related car expenses last year, with most people using the cents per kilometre method.

However, ATO Assistant Commissioner Tim Loh said this week there are some key changes to look out for this tax time when claiming deductions.

“When you’re getting ready to lodge, consider the records you have to support your claims this year – don’t just copy and paste your claims from last year, this will raise a red flag for us,” Loh said.

“We want people to get their deductions right on the first go and claim what they are entitled to – nothing more, nothing less. We have a series of 40 occupation and industry-specific guides which you should have a look at.

“Some occupations have expenses that are specific to their occupation. For example, flight attendants can claim rehydrating moisturisers and nurses can claim stethoscopes – our guides can help you get it right.”

After also advising Australians not to rush their returns this year, Loh said taxpayers who aren’t sure should reach out to a registered tax agent to help them get their tax return right the first time.

How work-related expense claims are changing this year

From 1 July 2022, the requirement to exclude the first $250 of certain self-education expenses has been removed. This change applies from the 2022–23 income year onwards.

Australian taxpayers who are claiming their working from home expenses can also now use the actual cost method or the revised fixed rate method to calculate their deductions, as long as they meet the eligibility and record-keeping requirements.

The revised fixed rate method has increased from 52 cents to 67 cents per hour worked from home, and taxpayers no longer need to have a separate home office or dedicated work space – so even if taxpayers are working from the couch, they can still use this method.

The revised fixed rate covers costs for electricity, gas, stationery, computer consumables, internet, and phone usage. Australian taxpayers can claim a separate deduction for those expenses not included in the rate, for example, a decline in value of depreciating assets like computers and office furniture.

However, to use the revised fixed rate method, taxpayers need a record of the total hours worked from home. From March 1, 2023, taxpayers are required to keep a full record of the total number of hours they have worked at home. A transitional arrangement is in place prior to March 1, 2023, and the ATO will accept a representative record of the hours worked from home for that time period. 

Taxpayers will also need evidence of the expenses covered by the rate that they have incurred, for example, a monthly or quarterly bill.

Records must be kept

The ATO is reminding people if they use the revised fixed rate method to make sure they understand what is already included and don’t double dip on deductions.

Loh said it’s important for taxpayers to ensure their claims reflect their actual working arrangements, whether that’s working from an office or hybrid arrangements. 

“Keeping the records you need to use this method is really simple – records of hours worked from home can be in any form, for example timesheets, rosters, or a diary of the full year. If you’ve used your phone and electricity when working from home, you just need at least one bill for each of these expenses,” he explained. 

For those looking to claim work-related car expenses this year, Loh reminded them the rate for the cents-per-kilometre method has also changed, from 72 cents to 78 cents per kilometre.

“Generally, you can claim a deduction for the cost of trips you undertake in performing your work duties, and not for your ordinary commute between home and work,” he said.

“The rate is all-inclusive, so be careful not to double dip your deductions by adding these expenses on top of the rate when calculating your deductions.”

The cents per kilometre rate includes the decline in value, registration, insurance, maintenance, repairs, and fuel costs.

Taxpayers can claim up to 5,000 work-related kilometres, per car. They must have written evidence to show how they worked out the work-related kilometres, for example, by keeping diary records of work-related trips.

To claim a deduction for a work-related expense, the ATO’s three golden rules are:

1. You spent the money yourself and weren’t reimbursed;
2. It directly relates to earning your income and it isn’t private in nature; and
3. You must have a record to prove it (usually a receipt).