With tax time just around the corner, let’s take a look at some of the weird expenses Australians have been trying to claim on their tax returns.
Every year during tax time, there are those who try to get away with claiming rather strange deductions, but officials have issued a warning to those who try to add sneaky extras to their claims.
From dog food, Tim Tams, and even weddings, these are some of the wild things taxpayers have tried to claim over the years.
Chartered Accountants, Australia and New Zealand tax chief Michael Croker, said he and his team have heard some “real doozies” around tax time.
“A tax agent reported a customer trying to pass on dog food as a ‘security expense’ to their company. While feeding a guard dog can be deductible in some cases, your pet won’t quite make it,” he said.
“Another tax consultant had a client who worked as a male ‘entertainer’ and asked if he could declare his cash earnings at the time of claiming the cost of the job.
“It’s safe to say that our tax agent politely pointed out that this wouldn’t be possible, and that he would have to report his income to the ATO or potentially face hefty fines.”
Mr Croker said that while these examples made for a good laugh, it wasn’t a wise idea to try to sneak these things past the ATO.
“While these are some hilarious examples of people getting creative with their tax claims, our advice as a chartered accountant is pretty simple: don’t take the chance or you’ll end up in the ATO’s waters,” he said.
The Australian Revenue Commissioner’s Assistant Commissioner Tim Loh has also hinted at some of the bizarre items people have tried to claim in the past.
Speaking at the ATO VAT invoice podcast, Mr Loh said tax officials would look very closely at people attempting to falsely declare personal expenses as a deduction.
There are many things you can claim, especially if you work from home, but unfortunately your favorite snack is not one of them.
“So, for example, someone tries to claim expenses for tea, coffee, and Tim Tams when they work from home,” he said.
“These are personal expenses. You cannot claim a deduction for personal expenses or the personal part of your costs.”
Mr Loh also warned that you cannot claim work-related expenses if your employer has provided the item or reimbursed you.
“It’s really important that people don’t copy and paste last year’s deductions,” he said.
“We do expect to see changes this year in what people can claim on their tax returns, as I mentioned earlier, as a result of the changing working conditions due to the pandemic.”
Speaking before tax time last year, Mr Loh also said some taxpayers were trying to claim toilet paper.
“There are always some funny ones,” he told NCA NewsWire at the time†
“Toilet paper – people have tried to claim dunny roll as a tax deduction, but obviously that’s a private expense so you can’t claim that.”
Some also tried to claim their Netflix subscription, even those who don’t work in a relevant industry like entertainment or media.
Speaking on the VAT invoice podcast this year, Mr Loh said there had also been instances of taxpayers trying to “double up,” particularly when calculating their work-from-home costs.
He said there are three different methods that can be used to calculate your work-from-home deduction.
The first is a flat rate method of $0.52 per hour that you work from home.
Mr. Loh said you need a separate workspace, such as a home office, to use this method. The $0.52 per hour covers electricity and furniture depreciation.
Plus, this method allows you to claim things like phone, internet, and technology depreciation.
“These costs are declared separately,” he said.
“But as I said before, you can only claim the work component, not the private component. So if you have used Netflix, you cannot claim the deduction for internet that you use for Netflix.
The second method is the actual cost method, which allows you to calculate the work costs you incur while working from home.
The third method is the temporary shortcut method that expires on June 30 of this year, which means that it can still be used for the tax return this year.
Using this method, you can claim $0.80 per working hour, for every hour you work from home.
“The thing with all of these methods is making sure you don’t double-dive. So we’ve noticed some people are claiming deductions using the temporary shortcut method, but then they’re trying to, you know, claim extra expenses,” said Mr. Loh.
“So you can’t claim a charge on a laptop or other items on top of that $0.80 per hour.”
Other bizarre tax deductions over the years
There have been a number of other strange tax deductions that Australians have tried to claim over the years, including wedding reception fees, new cars and Lego sets.
In 2019, the ATO released a list of some of the most ridiculous things people had tried to sneak into their tax claims.
One of the most outrageous was the cost of a $58,000 overseas wedding reception, which was listed as a work-related overseas “conference.”
The taxpayer reportedly claimed $33,087 on his tax return and $25,259 on his wife’s tax return.
The claim was completely dismissed and the woman was prosecuted.
Another person tried to claim Lego gift sets for his children on tax, while others tried to deduct sports equipment costs for their child athletes.
More than one person has attempted to claim the purchase of a new car, often for more than $20,000.
A personal car used for personal use and not for business purposes cannot be claimed against the immediate depreciation threshold of $30,000.
Childcare is also a major expense that many Australians have tried to claim, with the ATO seeing statements about claims where the person has written, “The cost of raising a newborn is expensive.”
One person even tried to claim $20,000 for raising twins.
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