ATO scrutinising car claims this tax time

Assistant Commissioner Kath Anderson said: 

“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 employer paid for or reimbursed.”

This is no doubt because over 3.75 million people made a work-related car expense claim in 2016/17 (totalling around $8.8 billion), and, each year, around 870,000 people claim the maximum amount under the cents-per-kilometre method.

Ms Anderson said that the ATO’s ability to identify claims that are unusual has improved due to enhancements in technology and data analytics: “Our models are especially useful in identifying people claiming things like home to work travel or trips not required as part of your job . . . simply travelling from home to work is not enough to qualify, no matter how far you live from your workplace.”

Ms Anderson said there are three golden rules for taxpayers to remember to get it right.

“One – you have to have spent the money yourself and can’t have been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”

Case studies

False logbook

A traffic supervisor claimed over $11,000 for work related car expenses, and provided a logbook to substantiate his claim. 

However, upon investigation the ATO discovered that the logbook wasn’t printed until the following year – the taxpayer admitted the logbook was fraudulent and it was ruled invalid.

Even though the logbook was invalid, the taxpayer was able to provide other evidence to show that he had travelled at least 5,000 kilometres for work-related purposes, so the ATO used the cents per kilometre method to calculate the taxpayer’s deduction (but his claim was reduced from over $11,000 to under $4,000).

Claiming for home to work travel

A Laboratory Technician claimed $3,300 for work-related car expenses, using the cents per kilometre method for 5,000 kilometres. 

However, he advised that his employer did not require him to use his car for work; this claim was based on him needing to get to work.

The ATO advised the taxpayer that home to work travel is a private expense and is not an allowable deduction – his claim was reduced to nil and the ATO applied a penalty for failure to take reasonable care.

Claiming for expenses paid for by employer

The ATO investigated a taxpayer who claimed $3800 for transporting bulky tools to and from work. He advised that he was required to transport the tools as there was no secure area to store them at his place of employment.

However, when the ATO spoke to his employer they advised that the taxpayer was provided with a company car at all times and was not required to use their own car to transport tools. Additionally, the employer provided all tools and did not require the employee to transport them.

The ATO reduced the taxpayer’s claim to $0 and applied a penalty as the taxpayer did not actually incur any work-related car expenses.

Incorrect claiming of home to work travel (not-so-bulky tools)

A tiler lodged his tax return using a registered tax agent and claimed over $4,000 in deductions relating to his car (based on transporting bulky equipment), travel and tools. To verify the tiler’s car claims, the ATO contacted his employer who confirmed that he was not required to transport any equipment to work that would be considered bulky – just a few pencils and a utility knife. The employer also advised that secure lockers were provided at the work site to store tools.

When asked to provide records of the travel and tools expenses, the tiler produced receipts for car parts, and receipts for all-day parking at the same workplace (not for travel between different worksites or jobs). The tiler’s claims for purchasing tools, carrying bulky equipment and car parking were disallowed because they were private expenses, not directly related to earning his income.

Double-dipping – claiming for a car which is under a novated lease

An employee manager claimed $3,800 in work-related car expenses. When we asked the taxpayer to verify that they owned the car and it was registered in their name, we discovered the car was under a novated lease. Under a novated lease, the employer makes the lease payments and generally incurs all the running costs of the car. An employee who claims a deduction for these expenses is double-dipping.

All deductions were disallowed and the ATO applied a penalty for failing to take reasonable care.

Please contact us on 9999 9999 if you would like more information.

Source: www.ato.gov.au

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