The ATO has been handed millions to chase debts, and deduction claims are back in the firing line

Tuesday night’s budget included an extra $134 million for the Australian Taxation Office, which accountants warn could be partially spent to crack down on deduction claims, from workplace expenses to car travel.

While the 2018 federal budget also included a range of funding for the office to crack down on black economy activities, the $133.7 million package is specifically earmarked for the tax office to take “a firm stance on tax and superannuation debts”.

This package is expected to net the budget bottom line $1.2 billion over the forward estimates by giving the ATO more resources to recover debts.

Meanwhile, the office was also granted $318.5 million for “mobile strike teams” and an “increased audit presence” as it takes a new approach to its work on recommendations from the Black Economy Taskforce.

The new funding comes after months of messaging from the tax office that it will be coming down hard on dodgy claims this year.

The ATO has recently signalled scrutiny on workplace-related deduction claims, travel, uniforms and laundry allowances, changes to the claims that can be made for tradie vehicles and most recently, general car-related expenses.

Last week, the office confirmed it will be taking a broad focus on work-related expenses this year, but car-related claims will be at the front of the firing line.

In a statement last Thursday, ATO Assistant Commissioner Kath Anderson said of particular concern are taxpayers who are claiming “private trips, trips they didn’t make, and car expenses that their employer paid for or reimbursed” as tax-deductible expenses.

In the 2016—17 financial year, Australians claimed $8.8 billion worth of car-expense deductions alone, she said.

Alarm bells should be ringing for taxpayers this June, says Paul Drum, head of policy at CPA Australia.

He says the extra funding in the budget is “totally related” to the ATO’s sustained messaging on a claims crackdown, and suspects that over the next six months the public will hear plenty more about the results of the tax office’s renewed focus on deductions.

“Expect to hear more about this — particularly around cars and the use of the laundry claim,” Drum says.

Business owners and individual taxpayers should keep in mind that the ATO has been looking into risk areas for lost revenue and there is a conscious effort to put a dampener on the billion-dollar space that is individual deduction claims, Drum says.

“We note the Commissioner of Taxation is on the public record stating that taxpayer abuse via incorrect work-related expense claims in tax revenue terms is larger than multinational tax avoidance,” he says.

ATO Commissioner Chris Jordan has even taken aim at accountants over the issue in the past few months, reflecting at a tax conference in March that data suggests inappropriate deduction claims are more common in agent-prepared tax returns than ones that individuals file on their own.

In the past six months, the advice from the ATO to taxpayers has been consistent: keep your receipts; only claim for things you actually use to earn a living; and don’t put in a deduction if your employer has already covered the cost.

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