Topics on work-related expense claims (1)

ATO and TPB Crack Down on Tax Agents and Work-Related Expense Claims

The Australian Taxation Office (ATO) recently estimated the net income tax gap for individuals not in business, revealing a $8.4 billion shortfall for the 2016 income year. Agent-prepared returns faced a higher adjustment rate (80%) compared to self-preparers (61%).

Work-related expense (WRE) claims have been a major focus, with the ATO scrutinizing claims like car expenses and laundry costs. The use of substantiation exceptions, such as the $300 WRE exception, is also under surveillance.

Tax agents are under increased scrutiny, highlighted by the Tax Practitioners Board's (TPB) targeting of 2,000 high-risk practitioners to combat overclaiming. Early analysis suggested these agents were involved in overclaiming WREs by around $1 billion.

A recent Administrative Appeals Tribunal (Tribunal) decision emphasized the importance of correct substantiation. The taxpayer in Reid v FCT [2019] AATA 4624 missed out on legitimate claims due to inadequate documentation for car and home office expenses.

Tax practitioners are urged to increase vigilance and take reasonable care when advising clients on WRE deduction entitlements and substantiation obligations.

Key Questions for Tax Practitioners:

• How thorough must a tax agent be in validating a client's WRE claims?
• To what extent should an agent's questions go in assessing the appropriateness of a claim?

Tax Tip: TPB updates substantiation guidance for tax practitioners, emphasizing the need for reasonable care in ascertaining client's affairs.

For further assistance or inquiries regarding tax matters, contact Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through the live calendar.