ATO Focus on Record Keeping and Work Related Deductions

As seen in Woopi News November 2022

Following on from last month’s article about the ATO’s focus on rental properties, other areas that the ATO are focussing on for the 2022 tax year is record keeping and work related expense claims. It’s important you rethink your claims and ensure you satisfy the 3 golden rules –

1. You must have spent the money yourself and weren’t reimbursed
2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income
3. You must have records to prove it

Taxpayers who falsify their records or cannot substantiate their claims to try and increase their refunds will be under increased scrutiny from the ATO. Records need to be kept for five years from the date you lodge your tax return and are usually a receipt or tax invoice showing the name of the supplier, amount and dates the expense was paid, or a diary or logbook to keep a track of your work or business related usage. Records don’t need to be in paper form (photos of your receipts are accepted), records made and stored electronically should be backed up rather than kept amongst your emails or stored on your phone as this data can be easily lost.

Work related expense claims are also being closely looked at. As many have worked from home over the last two years they have included working from home expenses (using one of the three methods available) in their tax returns. If continuing to make these claims there should be a corresponding reduction in car, uniform and other work related expenses. Taxpayers shouldn’t just copy their prior year claims, circumstances change, and rates differ. Make sure you use the correct occupation code, as it is used to compare you to other taxpayers with the same occupation at a similar income level. They are using this to measure if your deductions are higher than the benchmark for your occupation when selecting taxpayers for audit.