ATO sets its sights on builders, real estate agents in deduction crackdown

Tax experts are urging small businesses to ensure their tax returns are as accurate as possible, with builders, earthmovers and real estate agents among the occupations being targeted by the Tax Office this year.

The Australian Taxation Office estimates there are more than eight million people claiming around $16 billion on work-related expenses each year.

The Tax Office therefore pays close attention to claims to ensure they are legitimate, targeting a handful of professions each year. In 2010, it targeted teachers, engineers and mechanics.

“This year, the ATO will be paying close attention to claims from people employed [as] earthmoving plant operators, flight attendants, carpenters and joiners – including apprentices and trainees – and real estate employees,” an ATO spokesperson said in a statement.

“We have found people in these industries are at higher risk of getting their work-related expense claims wrong due to the type of deductions they are entitled to claim, such as motor vehicle and travel expenses.”

The ATO will write to 116,000 people in the rundown to the end of the financial year on June 30.

Among the errors targeted are failing to keep a log book or receipts for car expenses, and wrongly claiming for mobile phones.

“It is important you keep records for claims totaling $300 or more as, if you cannot prove your claim, you will not be entitled to the deduction and you may have to pay a penalty,” the spokesperson said.

Another common mistake is wrongly claiming the costs of driving a car when hauling bulky tools to and from a worksite.

Institute of Chartered Accountants tax counsel Yasser El-Ansary says work-related deductions are sometimes incorrectly claimed because the laws in this area are complex and often “a shade of grey”.

“It is important to think carefully about your circumstances… If you’re self-preparing your return, make the decision on whether or not you’re eligible for a deduction on the basis of all the different guides and products available through the Tax Office’s website,” El-Ansary says.

“They do prepare a lot of written material and, for self-preparers, that written material is invaluable in assisting them to understand whether or not they are able to claim something.”

In addition to occupation-specific guides, the ATO offers taxpayers the following tips:

• You must have incurred the expense in the year you are claiming it.
• The expense must be work-related and not private.
• You can use records other than paper receipts. A list of accepted records is available on the ATO website.

Meanwhile, tax commissioner Michael D’Ascenzo is urging taxpayers to get their records in order early and lodge soon after the 2011 tax year ends to “avoid the October rush”.

Last month, the ATO issued a warning about tax deductions for holiday packages when they are made to appear as work-related study tours.

This refers to arrangements whereby a taxpayer claims a deduction for expenses, incurred in relation to educational courses and seminars, where the relevant expenses don’t have a solid enough connection to the taxpayer’s employment.

“These expenses include the costs for domestic or overseas travel on a holiday activity or to a holiday destination,” the alert warns.