An IBM salesman who made $100,000 in bogus work claims, including his family grocery bill and $5000 in “secretarial services” from his seven year old, has lost in court.
Gary Ogden worked mostly from home selling IBM products during the 2011 and 2012 income years.
He claimed to have paid his son more than $5000 for secretarial services when in fact the son “sometimes ran upstairs to the study when the phone was ringing, answered the phone and then handed it to his father”.
He claimed a whopping $63,294 in work-related expenses on declared salary of $209,048 in 2011. In 2012, he claimed $53,473 on income of $143,383.
This included $2,250 worth of groceries for “business partners” who rarely visited.
There was also $838 in relation for the cost of “overtime meals”, one of which was taken at the BP at Marulan on the way to a family ski holiday and others at the St George Leagues Club, which was five minutes from his house.
According to Ogden and his accountant, David McNeice, 30% of the family home was used exclusively for work, including a “meeting room” which was in fact the living room. Two “storage areas” were in fact cupboards in the laundry and the space under the internal stairs.
An evening meal and breakfast the next morning were claimed on a number of occasions when McNeice stayed overnight.
In a judgment in January, Administrative Appeals Tribunal deputy president Stephen Frost described Ogden’s behaviour as “disgraceful”.
A parliamentary economics committee is considering whether scrapping work-related tax deductions could be traded off for lower personal income taxes.
In 2012-13, taxpayers claiming $19.7 billion in work-related expenses. Car expenses accounted for $8 billion, or 40%, home office costs, tools, equipment and other assets $7 billion and travel $2 billion.
The government’s Rethink discussion paper on tax reform asked whether a standard deduction could be introduced to cut compliance costs.
The Henry review recommended such an approach, and New Zealand “cashed out” work-related expenses to deliver a personal tax cut.
Justice Frost’s decision highlights some of the most egregious claims in a series of courtroom exchanges and findings.
MONTE CARLOS AND KRAFT EASY CHEESE
DEPUTY PRESIDENT: Right. I did my own analysis of some of this claimed expenditure in the client – sorry – the staff and client amenities category. And unless I’ve made some errors, and I don’t think I have, during the 2012 income year, that 12-month period, those ticks identified 39 packets of Monte Carlos?
MR OGDEN: Yes.
DEPUTY PRESIDENT: 39 packets?
MR OGDEN: Yes.
DEPUTY PRESIDENT: I didn’t separately record the White Wings Chunkies or the – sorry, just bear with me.
MS HAMMOND (representing the Tax Commissioner): The mini Wagon Wheels.
DEPUTY PRESIDENT: The Westons mini biscuits. The tins of Arnotts biscuits. The Wagon Wheels.
MS HAMMOND: Tiny Teddies.
DEPUTY PRESIDENT: I didn’t record them separately either but what I did come up with was 39 packets of Monte Carlos. That struck me as more than passing strange, I’ve got to say. 39 packets. My own research indicates that there are 12 biscuits in a packet. That’s 468 biscuits in the year. And that might sound a trivial thing for me to focus on but it does paint something of a picture. It’s starting to paint a picture of quite indiscriminate deduction claims?
MR OGDEN: Yes.
DEPUTY PRESIDENT: That’s the picture that it’s painting?
MR OGDEN: Yes. Yes.
MS HAMMOND: Then in August you purchase even more items for these clients. You purchase another two packets of the Bega Stringer Cheese. Now you’ve got four of these packets by this stage. You also purchase Bega dairy cheese in the eight pack, Bega slice cheese. Can I ask you, did you actually ever offer anybody a Bega stringer cheese?
MR OGDEN: Probably David when he’s over.
MS HAMMOND: But David is not a business partner?
MR OGDEN: No.
MS HAMMOND: Did you offer the three gentlemen that you identified as coming to your home, a Bega stringer cheese?
DEPUTY PRESIDENT: Someone – you say it wasn’t you – someone actually went through these receipts and put ticks next to these things. Some of the items that were ticked in that exercise although called “Tea” – t-e-a – in the summary at page 264?
MR OGDEN: Yes.
DEPUTY PRESIDENT: It’s actually 1.5 litre bottles of Lipton Iced Tea?
MR OGDEN: Iced tea, yes.
DEPUTY PRESIDENT: There are claims under the heading “Cheese” for Bega sliced cheese. There’s a claim for Kraft Easy Cheese. You will forgive me for not knowing what Kraft Easy Cheese is. I subsequently have found out that Kraft Easy Cheese is cheese in a can that’s dispensed in a sort of aerosol fashion. It comes out of a can almost like toothpaste, and I thought that would be a strange thing to be offering business partners or clients?
MR OGDEN: It would be, yes.
DEPUTY PRESIDENT: There’s quite a bit of sliced cheese. I must say that struck me as more likely purchased for the purpose of putting on the children’s lunches. That’s the way it struck me. I could be wrong with that but that’s the impression that I had. It really is quite a remarkable state of affairs that someone – and I suspect this but I don’t know that there’s really any way that I can become comfortably satisfied about it but I suspect that someone has gone through these receipts and ticked things, ticked items that maybe look as though we might be able to get away with in broad categories. The categories being cheese, biscuits, nuts and soft drinks. Because on a version of events, that’s what’s made available to clients and business partners, but it doesn’t stack up. …