ATO warns it will be watching ‘double dippers’ this tax year

According to the ATO data, around 8.4 million Australians claimed nearly $19.8 billion in work-related expenses in 2021.

“When people prepare their tax return, it’s important to remember the rules for claiming different types of work-related expenses. What can be claimed depends on the type of job, individual circumstances, and whether there are the required records to support the claim,” said assistant commissioner Tim Loh.

“While some people make genuine mistakes, we do see people trying to gain an unfair advantage by claiming incorrect or false expenses. A mistake that we often see in tax returns is people claiming expenses twice.”

Mr Loh warned taxpayers that with the ATO’s sophisticated data analytics, anyone caught claiming more than they are entitled will be caught and penalised.

One of the most common “double dipping” mistakes according to the ATO is claiming working-from-home expenses.

“One in three Aussies claimed working from home expenses in their tax return last year and we expect this trend to continue,” Mr Loh said.

“A common mistake we see is people using the working from home shortcut method to claim their working from home expenses and then double dipping, claiming additional amounts in their return for expenses such as their mobile phone and internet bills, as well as the decline in value of equipment and furniture.”

The ATO is recommending using the working-from-home shortcut method as it is all-inclusive.

There are three methods available to claim a deduction for working-from-home expenses depending on individual circumstances, the shortcut, fixed-rate and actual cost methods. The method that gives people the best outcome can be used, as long as the eligibility and record-keeping requirements for their chosen method are observed.

Taxpayers can use the home office expenses calculator to help them work out which method will give them the best outcome.

“While the traditional methods require receipts, paperwork and other record keeping, the shortcut method only requires a record of hours worked – diary entries or timesheets will suffice,” Mr Loh said.

When claiming working-from-home expenses using the shortcut method, the amount needs to be included at the Other work-related expenses question in tax returns with “COVID-hourly rate” in the description field.

If a method other than the shortcut method is used in later years and you want to claim depreciation for an expensive purchase such as a laptop, the correct records for that item must be kept.

Car expenses will also be closely looked at this year.

Nearly 3 million people claimed work-related car expenses in 2021 and one of the most common mistakes was people using the cents-per-kilometre method to make their claim, and then double-dipping by claiming expenses separately such as fuel, car insurance, and registration.

The cents-per-kilometre rate is all-inclusive and covers decline in value, registration, insurance, maintenance, repairs, and fuel costs. These expenses can’t be added on top of the rate when calculating deductions.

The ATO will also be taking a closer look at claims calculated using the logbook method, to ensure they reflect people’s circumstances coming out of the pandemic.

“You must choose your preferred method when calculating car expenses, the cents per kilometre or the logbook method. Just because there is a dip in the road, doesn’t mean you can double dip your car expenses,” Mr Loh said.

Finally, the ATO is making sure taxpayers aren’t claiming expenses where they have already been reimbursed by their employer.

“If your boss has reimbursed your dry-cleaning costs for your uniform, but you then claim laundry deductions on your tax return, well you’re picking your neighbours’ pockets,” Mr Loh said.