The Australian Taxation Office (ATO) is cracking down on claims for work-related car expenses this year.
The ATO says many get tripped up by making claims that they can’t justify.
More than 3 million people made a work-related car expense in 2015-16, totalling around $8.5 billion.
“Some people think they are entitled to a ‘standard deduction’ for car expenses, using the cents per kilometre method, but this is not the case,” says assistant ATO commissioner Kath Anderson.
“While it’s true that you don’t need written evidence for claims of up to 5,000 kilometres per year, you do need to be able to show that you were required to use your car for work, and how you calculated your claim.”
Car expenses when performing duties as an employee are usually deductible. But claims for trips between home and work aren’t unless there is a good reason, such as carrying bulky tools or equipment.
“It is also important to make sure you don’t double-dip,” says Anderson.
“In other words, you cannot claim expenses that have already been paid by your employer, including salary sacrificing arrangements.”
To be able to claim, you have to have spent the money yourself and can’t have been reimbursed for that by your employer.
She cites the example of the railway guard who claimed car expenses for travelling to and from work, basing his claim on the fact that he carried bulky tools, including his flag, safety vest, handheld radio, torch, instructions and timetables.
His employer told the ATO that secure facilities for equipment were available at work.
The railway guard ended up paying $2,000 for tax owed plus interest.
In another case, a manager claimed $3,800 in work-related car expenses. When asked to verify that they owned the car and it was registered in their name, the ATO discovered the car was under a novated lease arrangement.
Employees who have a novated lease arrangement are not considered to have expenses in relation to the car because the employer leases the car on their behalf.
A school crossing safety officer claimed car expense for travel between his home and workplace, say he was carrying a safety sign.
However, the school told the ATO the sign was stored on school property each day. The car expense claim was rejected.