Every year the Australian Taxation Office reveals who they will be targeting with their tax return auditing net. This year the ATO has announced that instead of targeting a particular profession, they will instead be casting the net even wider by scoping in an tax payer which has submitted an electronic device as a tax deduction.
These electronic devices can include anything from mobile phones, blackberries, computers, lap tops, or tablets. They make up a huge part of the work-related expenses of Australians which total to over $19.5 billion each year. Often the cross-over of usage seeps into our personal life and is reflected in our tax returns and this is what the ATO will be looking for.
Assistant Commissioner of the ATO, Karen Anstis says, “People are using their computers at home for work-related purposes but it is very important they understand the distinctions between what is work-related and what is personal use”. The tax department will be looking very closely at tax payers who have listed electronic devices as a claim this year and there is no doubt they will be making their point.
The ATO will not only cast the net over electronic devices, but also over travel expenses and the transfer of tools and equipment between home and work. This puts a spot light on tradesmen, and specialised contractors who need to transfer their equipment such as power tools or large pieces of equipment relating to their professions.
Avoiding the tax net
If you use your vehicle for both private or domestic needs as well as work (eg. Your work van or ute), you will only be able to claim a return for the portion which is work-related. For example car expenses and fuel from home to work would be non-deductable, however when travelling between jobs a contractor can claim this.
If however, you need to carry bulky equipment or tools and machinery to and from work that you cannot leave at the work site (which is very often the case), then the travel expense between home and work is deductible. Work related travel includes making deliveries, driving errands, visiting clients for quotes or inspections, and driving between work sites.
Some important points to remember:
• You can claim laundry if your attire is occupation-specific up to $150.00
• Self-education is often non-deductible
• Phones, tools, equipment, and running cost are deductible
• Union fees and professional association fees are deductible
• Overtime meals can be claimed depending on the employment situation
• Make sure you keep all proof of purchase for the ATO in case they ask you to provide it
New ATO auditing techniques
Anstis also warns that new auditing technologies “enable us to look at every single tax return” meaning that they will be filtering through each business with no exceptions.
When it comes to insurance and your tax return, you can prepay your Income Protection Insurance in order to bring the deduction forward. This is a very common method used to reduce your personal tax bill. Also, make sure you have obtained private health insurance especially if you a high income earner in order to avoid the Medicare Levy Surcharge.
Of course, the best way to navigate your tax return is to ensure that you do the right thing in the first place. Anstis gives her one piece of advice for submitting a tax return is “claim the right amount – no more, no less – and evidence to substantiate the claim”. This means keeping record and receipts to stay in the clear.
If you need more information regarding contractor specific tax information you can view the ATO website here. Otherwise please contact Contractor Cover today for any insurance related queries and we will more than happy to help.