The ATO has announced that it will be “closely examining” claims for work-related car expenses this year, as part of its monitoring of work related expense claims.
More than 3.7 million people made a work-related car expense claim last financial year, worth a total of $8.8 billion.
ATO assistant commissioner Kath Anderson says: “We are particularly concerned about taxpayers claiming for things they are not entitled to, like private trips, trips they didn’t make and car expenses that their employers paid for.”
There are two ways to calculate a deduction for care expenses: the cents per kilometre method, which is limited to claims for work-related travel up to 5000 kms; and a log book to determine the work-related proportion of actual expenses incurred.
Anderson says each year around 870,000 people claim for 5000 kms under the cents per kilometre method, which does not require a log book.
“We are concerned that some taxpayers mistakenly believe that this is a standard deduction they are entitled to, without needing to provide any evidence of having travelled that distance, or even having undertaken any travel at all,” she says.
Even though there is no requirement for a log book with the cents per kilometre method, taxpayers need to be able to show how they have calculated their claim. For example, they could keep a diary of the places they have driven to for work and how often.
In one case, a taxpayer claimed $3800 for transporting tools to and from work, claiming he could not store them at his workplace. When the ATO contacted his employer, it found that the taxpayer had a company car and was not required to use their own car. In addition, the employer provided all tools at the job.
Anderson says ATO research shows that about half of all taxpayers believe it is OK to falsify tax deduction claims. “Our research tells us there are quite a few people who think it is OK to skim a little bit,” she says.
“Unless you have a work-related need to travel while performing your job, you won’t be able to claim a deduction. Travelling to work and back home is not deductible for most people.”
Taxpayers face a minimum fine of $4200 for providing misleading statements in their tax returns, rising to $12,600 if there is evidence of intentional misleading.
Anderson says taxpayers can avoid mistakes if the follow the three golden rules of claiming car expenses. Only make a claim if:
- You paid the for the expense yourself and were not reimbursed;
- It’s directly related to earning your income – that is, your employer required you to make the trips as part of your job; and
- You have a record to support your claim.