The end of the financial year is just weeks away, which means tax season is near.
With rising cost of living pressures and interest rates, along with expenses born of the pandemic, it might seem tempting to try to pad out the claims and deductions.
But Chartered Accountants Australia and New Zealand (CA ANZ) have warned it's far safer to play it straight.
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CA ANZ Tax Leader Michael Croker said Chartered Accountants have seen and heard it all – but trying it on with the ATO is not a smart strategy.
"Some funny, some creative, but all non-deductible, our members have reported some real doozeys over the years," Croker said.
"One tax agent had a client try to underwrite their pet expenses – arguing their pet pug was a 'business mascot' which 'welcomed customers and staff'.
"Another tax agent reported a client saying he was an 'entertainment consultant', trying to claim his video games and streaming services. He was actually a checkout worker at a well-known technology retailer.
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"And perhaps not as altruistic as they thought, another person sought to claim travel to Cairns as a 'gift or donation' for tax deductible purposes, because they gave a blood donation."
Croker said there was often confusion around what you can and can't claim at tax time – but there are some tips that can help clear things up.
Work-related Rapid Antigen Tests (RATs)
The government announced in February that COVID-19 testing expenses are tax deductible for tests that are required when attending a workplace, but the law wasn't passed until March 31.
"Hold onto your RAT receipts," Croker said.
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But he noted the ATO would also accept reasonable evidence of RAT expenses incurred before the law changed.
Croker warned against claiming RAT deductions for family reasons.
"A RAT needed to send the kids off to school, visit grandma in the old folks home or for holiday travel isn't deductible," he said.
Home office equipment and expenses
"Remember that home office equipment and expenses can give rise to deductions where used to produce income," Croker said.
"Your printer, desk, stationery and other home-based, work-related expenses can add up and make a real difference.
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"But don't try to sneak through your Netflix subscription, because that will raise a red flag with the ATO. And some costs may need to be apportioned between work and private use."
If keeping track of each item of work from home expenditure is too hard, an accountant can help determine whether somebody can use the ATO's "shortcut" tax method to claim expenses at 80 cents per hour for each hour of working from home.
Self-education expenses
People can claim self-education expenses when the course directly relates to their occupation.
"You can also claim for courses that result in, or are likely to result in, an increase your income from your current employment," Croker said.
"But deductions generally aren't allowed for gaining new qualifications in a totally different occupation."
Work clothing and dry cleaning
A deduction can also apply to costs somebody incurs when buying, hiring or repairing clothing and footwear if it is specific to their occupation, or a compulsory uniform.
"But remember, you may need to have written evidence that shows you bought the clothing, the amount you spent, and your cleaning costs," Croker said.
Donations
"It's great if you gave to charity but if that charity is not registered as a Deductible Gift Recipient and you don't have a paper record of the donation, then don't expect the ATO to be as charitable," Croker said.
"Some taxpayers contribute to worthy causes on Go Fund Me or similar sites – it's unlikely you can claim that back."
Don't double-dip on deductions
Croker said a common mistake was for a taxpayer to claim a deduction for an expense already reimbursed by the employer.
"The ATO has a habit of contacting employers and verifying whether an employee with suspicious tax deductions actually paid the amount," he said.
Avoid the temptation to make a "cost of living" tax deduction
With increased cost of living pressures, Croker said some Australians might be tempted to over-claim deductions in 2022.
"With petrol costing north of $2 a litre, many accountants are fielding questions about deductions for car running costs," he said.
Ditto for increased home electricity and gas costs.
"Deductions need to be claimed in accordance with the tax law," he said.
