ATO caution for your clients with work-related car claims
Kath Anderson, ATO’s Assistant Commissioner, has declared a caution for the taxpayers who are making their beliefs about “standard” deductions regarding vehicle expenses particularly when we talk about cents per kilometre method.
Though there is no need of written evidence for deductions up to 5,000 kilometres while making such claims, Anderson prompts practitioners that their patrons are still required to have actually incurred these expenses. Further she states, “They do need to be able to show that they were required to use their car for work, and how they calculated their claim”.
ATO documented a total of $8.5 billion in work-related car expense claims for the 2015-16 income year, with a significant proportion precisely at the edge that does not necessitate comprehensive written records. AOT has determined to limit what it can of this revenue outflow.
Anderson says, “Even though we do not have any issue with people using the cents per kilometre method, and we expect that most of the claims at this verge may be genuine but we are constantly reminding people that when it comes to deductions, there’s no such thing as a ‘free pass’”.
ATO has provided information for ordinary taxpayers on work-related car claims and you can find it here. It could assist you in explaining the facts to your clients. For the illustration of mismanaged claims, ATO has provided three case studies.
A railway guard claimed deductions for car expenses in travelling to and from work, basing his claim on the fact that he carried bulky tools (including his flag, safety vest, handheld radio, torch, instructions and timetables) in his car.
He attracted an audit because his deductions were much higher than those of other people in the same occupation. His employer advised us that secure facilities for equipment were available on the business premises, so the transportation of equipment was the employee’s choice. For this reason, expenses relating to travelling to and from work are not an allowable deduction in this situation, and the taxpayer had to pay $2,000 for tax owed plus interest.
Double dipping deductions
An employee manager claimed $3,800 in work-related car expenses. When the ATO asked the taxpayer to verify that they owned the car and it was registered in their name, it discovered the car was under a novated lease arrangement.
Employees who have a novated lease arrangement are not considered to have expenses in relation to the car, as their employer leases the car on their behalf. Claiming a deduction for these expenses is considered double-dipping.
All deductions were disallowed and the ATO applied a penalty.
A school crossing safety officer claimed work-related car expense for travel between his home and workplace. He indicated that this expense related to the carriage of bulky tools – a safety sign for the school crossing. However the school informed the ATO that the sign was securely stored on school property each day. The taxpayer’s car expense claims were disallowed because the trip from home to work was private in nature and did not involve the transportation of the sign.