With the October 31 tax lodgment deadline looming large on the horizon, many taxpayers may be scrambling to patch together a few possible tax deductions they hope to be able to claim. Of course most taxpayers are keen to find out about any extra tax deductions that may not have been revealed before. But in the rush before tax return deadline, don’t waste time claiming these deductions.
So, in the interests of helping to save both your and your clients’ time, below is a list of items and costs that a lot of taxpayers commonly think of as tax deductible but that are usually knocked back by the ATO.
While some may appear obviously not allowable, they have all been genuinely attempted to be claimed as tax deductions (and some more real examples from this Tax Time are included below). However some of the following attempted claims may surprise as not being generally allowed by the ATO.
So while the following are not necessarily completely off the agenda as possible claims, but may be allowable in certain circumstances if solid and “reasonably arguable positions” are made in support of them, the following will be knocked back as a matter of course.
Off the menu
Driver’s licence. Vehicle expenses such as repairs, interest on a loan and servicing may be claimable, but the cost of a driver’s licence is not generally an allowable deduction — even if it is a condition of employment.
Vaccinations. Even airline employees cannot generally claim the cost of vaccination against diseases they may come in contact with in the course of earning an income. Some disease protections, such as against cattle-borne Q fever, may be allowed.
Grooming costs. Although an employee may be required to maintain a certain standard of appearance for their job, costs such as hairdressing or cosmetics are still generally not allowed. Not even Defence Force personnel get a deduction for grooming, even though military regulations demand it.
Police clearance and record checks. Some checks are required as a prerequisite to secure certain types of employment, such as a “working with children check”, but the cost of these clearance procedures are not allowable deductions. Generally the reason given is that the cost is incurred “at a point too soon” to be associated with the particular employment income.
Eviction of a tenant. Expenses incurred by a rental property owner in raising eviction proceedings against a tenant whose term has expired or who has defaulted on rental payments are not generally allowed as a tax deduction to the property owner.
Volunteer work. No deductions are available to cover expenditure made while volunteering for a charity or other not-for-profit organisation. So petrol used while driving to help fight bushfires or other community efforts do not generally qualify.
Dodgy deductions: Some real Tax Time 2016 cases
The ATO has provided examples of some actual claims that it deemed to be unacceptable, and which it has consequently knocked back.
Bulky tool transport: A railway guard claimed $3,700 in work-related car expenses for travel between his home and workplace. He indicated that this expense related to carrying bulky tools – including large instruction manuals and safety equipment. Upon inquiry, the employer advised the ATO that the equipment could be securely stored on their premises. The taxpayer’s car expense claims were disallowed because the equipment could be stored at work and carrying them was his personal choice, not a requirement of his employer.
The tipple tour: A wine expert, working at a high-end restaurant, took annual leave and went to Europe for a holiday. He claimed thousands of dollars in airfares, car expenses, accommodation, and various tour expenses, based on the fact that he’d visited some wineries. He also claimed over $9,000 for cases of wine. All his deductions were disallowed when the employer confirmed the claims were private in nature and not related to earning his income.
Phantom attendance: A medical professional made a claim for attending a conference in America and provided an invoice for the expense. When the ATO checked, it found that the taxpayer was still in Australia at the time of the conference. The claims were disallowed and the taxpayer received a substantial penalty.
Road less travelled: A taxpayer claimed deductions for car expenses using the logbook method. The ATO found they had recorded kilometres in their log book on days when there was no record of the car travelling on certain toll roads, and further inquiries identified that the taxpayer was out of the country. Their claims were disallowed.
Education in credulity: A taxpayer claimed self-education expenses for the cost of leasing a residential property, which was not his main residence. The taxpayer claimed he had to incur the expense of renting the property as he “required peace and quiet for uninterrupted study which he could not have in his own home”. This was not deductible.
In addition to the rental expenses, the cost of a storage facility was claimed as “the taxpayer needed to store his books and study materials”. They claimed they needed this because of the huge amount of books and study material associated with his course and had no space in his private or rented residence where these could be housed. This was not deductible.
The cost of renting the property was around $57,000, with additional expense of $7,500 for the storage facility. The actual cost of the study program he attended that year was only $1,200.
# [claiming costs], [expense claims], [expenses], [tax deductions], [tax returns], [tax time 2016]
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