Busted! Top 10 tax myths
The ATO has identified the top 10 tax myths causing incorrect claims at tax-time.
Myth 1
Everyone can automatically claim $150 for clothing and laundry, 5000 kms for car-related expenses and $300 for work-related expenses, even if they didn’t spend the money.
Fact: In certain circumstances, there are record-keeping exemptions which mean you don’t need to keep receipts. However, this is not an automatic entitlement or a standard deduction for everyone. While you don’t need receipts for claims under $300 for work-related expenses, $150 for laundry and 5000 kms, you:
Still must have spent the money;
It must be related to earning your income; and
Must be able to explain how you calculated your claim.
Myth 2
I don’t need a receipt, I can just use my bank or credit card statement.
Fact: The only time you don’t need these details is if record-keeping exceptions apply. To claim a tax deduction you need to be able to show that you:
Spent the money;
What you spent it on, who the supplier was; and
When the purchase occurred.
Bank or credit card statements usually won’t contain this information.
Myth 3
I can claim makeup that contains sunscreen if I work outside.
Fact: We all like to look good but cosmetics are usually a private expense, and adding sun protection doesn’t make it tax deductible. However, it may be deductible if:
The primary purpose of the product is sunscreen (i.e. it has a high SPF rating);
The cosmetic component is incidental; and
You were required to wear it because you work outdoors in the sun.
Myth 4
I can claim my gym membership because I need to be fit for work.
Fact: While you might like to keep fit, there are only a very small number of people who can claim gym memberships, an example might be a special operations officer in the Australian Defence Force. For your claim to be eligible, your job would have to depend on you maintaining a very high level of fitness, for which you are regularly tested.
Myth 5
I can claim all my travel expenses if I add a conference or a few days work to my holiday.
Fact: If you decide to add a conference or some work meetings to your holiday, or a holiday to your work trip, you must apportion the travel expenses between the private and work-related components.
Myth 6
I can claim my work clothes because my employer told me to wear a certain colour.
Fact: Plain clothes, like black pants, are not deductible even if your boss told you to wear them. You won’t be able to claim, unless your clothing is a uniform that is:
Unique and distinct to your employer; or
Protective or occupation-specific clothing that you were required to wear to earn your income, for example a chefs jacket.
Myth 7
I can claim my netflix and foxtel subscriptions because I need to keep up to date for work.
Fact: Unless you only use your subscriptions for work purposes, you will have to:
Apportion the cost between business and private usag; and
Only claim the work-related portion of your expenses.
You will also need to be able to show a strong connection between earning your income and any subscriptions.
Myth 8
I can claim home-to-work travel as I need to get to work to earn my income.
Fact: For most of us, home to work travel is private since your boss doesn’t pay you until you get to work, so you can’t claim this travel. There are limited circumstances where someone who has to transport bulky equipment can make a claim.
Myth 9
I have a capped phone plan so I can claim both personal and business calls.
Fact: Unless you only use your phone for work, you will have to apportion the cost between business and personal usage and only claim the work-related portion of your expenses.
Myth 10
If I use a tax agent or accountant, they will take responsibility for my claims.
Fact: Even if you use a tax agent, you are ultimately responsible for ensuring the information in your return, including the deductions you claim, is correct and has documented proof. You cannot transfer that responsibility to your tax agent so make sure you give them complete and accurate information.
Fact
It’s easy to keep track of work-related expenses on a spreadsheet, and you can also download the ATO’s MyDeductions app, which is a great help (and it’s free!).
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