ATO warning over tax deduction claimed by millions: ‘Common myth’

The Australian Taxation Office (ATO) is warning Aussies to take care when claiming work-related expenses this year and to make sure they have the records and receipts to prove it. Aussies have been given the “green light” to lodge their tax returns.

There are three “golden rules” when it comes to claiming work-related expenses. You must have spent the money yourself, the expense must directly relate to earning your income, and you must have a record of the expense (usually a receipt) to prove it.

ATO assistant commissioner Rob Thomson said work-related expenses were a “key focus” for the tax office this year.

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“Work-related expenses are the largest category of deductions the ATO sees for individuals each year, with more than 8 million claims last year,” Thomson said.

Thomson urged Aussies to set themselves up for success by checking what work-related expenses they can claim, what records they need to prove them, and making a plan to store those records throughout the year.

You can keep records as a paper version, electronic copy or take a clear photo. The myDeductions tool on the ATO app also lets you store copies of your receipts electronically.

“Remember, regardless of how you keep your records, you need to keep them for five years from the date you lodge your tax return,” Thomson said.

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Do I need receipts to claim?

There’s a “common myth” you can automatically claim $300 for work-related expenses without any proof, which Thomson said isn’t correct.

“If your total claim for work-related expenses is less than $300, you may not need receipts, but you must be able to show you spent the money and how you have calculated the amount of your claim,” Thomson said.

The ATO may knock back your deductions if you’re not eligible or don’t keep the right records.

“A bank statement, on its own, generally isn’t a sufficient level of evidence to claim a deduction for work-related expenses,” Thomson said.

If you only have a bank statement to go off, Tax Invest Accounting director Belinda Raso recommends taking a photocopy or picture of the item you’ve purchased and making a note of why you purchased it and how it was used it your job.

“Then for bonus points, take a photo of the actual item to prove that you've got it and then you can even go to the supplier's website and just take a screenshot,” she told Yahoo Finance.

What work-related expenses can I claim?

The ATO has occupation guides to see what you can and can’t claim. H&R Block’s Mark Chapman has also written a handy guide to the best deductions available here.

You can also see our breakdown of work-from-home deductions, along with why using the “fixed rate method” over the “actual cost method” could leave you worse off.

If you're claiming car expenses, the records you need will depend on whether you use the "logbook method" or "cents per kilometre" method. The ATO has more on that here.

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