Tax Warnings for Individuals and Small Businesses

ATO cracks down on individuals, small businesses

The ATO is making it a priority to investigate individuals who make excessive claims and erroneous tax deductions. The ATO is keen to reduce the ‘tax gap’, the difference between how much the ATO collects and how much it should if all taxpayers complied with the law.

With tax time fast approaching, it is important to know what can or cannot be claimed. Deductions are only allowable if the expense has been paid for and not reimbursed, directly related to work and not a private expense plus supporting documents must be kept.

Car-related expenses

Of particular interest are those taxpayers who have claimed car deductions through the “cents per kilometer method”. The ATO are concerned with those taxpayers who claim the maximum rate of 5,000km yet are in occupations that do not support high levels of business related travel.

Other work-related deductions

These include home office, union & membership fees, broadband, mobile phone, tools & equipment. Most commonly taxpayers consider the standard claim of $300 to be an automatic deduction without having spent the money. Although you don’t need receipts for claims up to $300, you must be able to show how the money was spent.

Assistant Commissioner, Kath Anderson, has confirmed that the ATO is employing sophisticated computer systems and analytics to benchmark and compare expenditure with others in similar occupations and income brackets. Reviews will be conducted on those that appear to have lodged excessive tax deduction claims. Standard laundry deductions of $150 are popular and as a result the ATO believes many are incorrect.

Small businesses

The ATO is also looking at small business that have a lot of ‘cash’ only transactions. In 2017, the ATO conducted 11,000 business audits, yielding nearly $200 million in tax and penalties. As result, the ATO have announced there will be more visits by their ‘Black Economy Taskforce’ to locations that have cash only shops.

Call our office on 6583 5327 to discuss how we can assist you or your business.