With tax time just around the corner, let’s take a look at some of the weird expenses Australians have been trying to claim on their tax returns.
Every year at tax time there are people who try to get away with claiming some rather weird deductions, but authorities have issued a warning to those who try to add sneaky extras to their claims.
Dog food, Tim Tams and even weddings, these are some of the wild things taxpayers have tried to claim over the years.
Michael Croker, tax leader for Australian and New Zealand Chartered Accountants, said he and his team had heard “real doozies” coming around tax time.
“A tax agent reported that a customer was trying to pass off dog food as a ‘security fee’ for his business. While feeding a guard dog may be deductible in some cases, your pet doesn’t quite make the cut,” he said.
“Another tax official had a client who worked as a male ‘artist’ and asked if he could report his cash income along with work-related expenses.
“Safe to say our tax officer politely pointed out that this would not be possible, and that he had to report his income to the ATO or risk hefty fines.”
Mr Croker said that while these examples provided a good laugh, it was not a good idea to try to sneak these things past the ATO.
“While these are some hilarious examples of people getting creative with their tax returns, our advice as a chartered accountant is pretty simple: don’t take the mickey or you’ll find yourself in hot water with the ATO,” he said.
Australian Taxation Office Assistant Commissioner Tim Loh also hinted at some of the bizarre items people have tried to claim in the past.
Speaking on the ATO Tax invoice podcast, Loh said tax officials will take a very close look at people who try to falsely claim personal expenses as a deduction.
There’s a lot you can claim, especially if you’re working from home, but unfortunately your favorite snack isn’t one of them.
“So, for example, someone is trying to claim expenses for tea, coffee and Tim Tams when working from home,” he said.
“These are personal expenses. You cannot claim a deduction for personal expenses or the personal portion of your expenses.
Mr. Loh also warned that you cannot claim a work-related expense if your employer provided the item or reimbursed you.
“It’s really important that people don’t copy and paste last year’s deductions,” he said.
“We expect to see changes in what people can claim on their tax returns this year, as I’ve said before, due to changing working conditions as a result of the pandemic.”
Speaking ahead of tax time last year, Mr Loh also said some taxpayers had tried to demand toilet paper.
“There are always a few funny ones,” he said NCA NewsWire at the time.
“Toilet paper – people have tried to claim the dunny roll as a tax deduction but obviously it’s a private expense so you can’t claim it.”
Some have also tried to claim their Netflix subscription, even those who don’t work in a relevant industry like entertainment or media.
Speaking on the Tax invoice podcast this year, Mr Loh said there have also been instances of taxpayers trying to “double down”, particularly when calculating their work-from-home expenses.
He said there were three different methods that could be used to calculate your homework deductions.
The first is a fixed rate method of $0.52 per hour that you work from home.
Mr. Loh said you must have a separate workspace, such as a home office, to claim this method. The $0.52 per hour covers electricity and the decline in value of furniture.
In addition to that, with this method, you can claim things like phone, internet, and technology depreciation.
“These expenses are claimed separately,” he said.
“But as I said before, you can only claim the professional component, not the private component. So if you use Netflix, you won’t be able to claim the internet deduction you use for Netflix.
The second method is the actual cost method, which allows you to calculate the labor rate expenses you incur when working from home.
The third method is the temporary shortcut method which is due to end on June 30 of this year, meaning it can still be used for this year’s tax return.
When you use this method, you can claim $0.80 per hour worked, for every hour worked from home.
“Now the trick with any of these methods is to make sure you don’t double up. So we noticed that some people were claiming deductions using the temporary shortcut method, but then they were trying to claim, you know, extra expenses on top of that,” Loh said.
“So you can’t claim laptop depreciation or other items on top of that $0.80 an hour.”
Other Bizarre Tax Deductions Over the Years
There have been a number of other bizarre tax deductions Australians have tried to claim over the years, including wedding reception expenses, new cars and Lego sets.
In 2019, the ATO released a list of some of the most ridiculous things people had tried to sneak into their tax claims.
One of the most outrageous was the cost of a $58,000 overseas wedding reception, listed as a work-related overseas “conference”.
The taxpayer reportedly claimed $33,087 on his return and $25,259 on his wife’s tax return.
The claim was denied in its entirety and the wife was prosecuted.
Another person tried to claim Lego gift sets for his children on taxes, while others tried to deduct the cost of sports equipment for their child athletes.
More than one person has attempted to claim the purchase of a new car, often for over $20,000.
A personal car that is used for personal purposes and not for business purposes cannot be claimed against the $30,000 instant asset write-off threshold.
Childcare is also a major expense that many Australians have tried to claim, with the ATO seeing statements on claims where the person wrote: ‘The cost of raising a newborn baby is expensive.’
One person even tried to claim $20,000 for raising twins.
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