Last financial year, nearly 700,000 taxpayers claimed almost $2 billion worth of ‘other expenses’ in their returns.
While the majority of these claims are legitimate, there are always those who look to rort to the system, either intentionally or unintentionally.
Assistant Commissioner Karen Foat said that a systematic review of claims had found, and disallowed, some very unusual expenses, including dental costs, Lego sets and even a wedding.
“These claims add up to a lot of money. If the deduction isn’t directly related to earning income, we can’t allow it,” Ms Foat said.
“A couple of taxpayers claimed dental expenses, believing a nice smile was essential to finding a job – and was therefore deductible. It isn’t and their claims were disallowed.”
“Another taxpayer claimed the Lego sets they bought as gifts for their children. Unsurprisingly, this claim was disallowed. Personal gifts don’t qualify, and it’s not okay to ask Australian taxpayers to subsidise presents.”
When completing a tax return, the ATO has an ‘other’ deductions section reserved for expenses that don’t appear elsewhere.
People commonly put work-related expenses or charitable donations in here, both of which are tax-deductible.
But as the ATO clearly states, you can only claim deductions on expenses directly related to earning an income that wasn’t reimbursed by an employer.
When claiming above a certain amount, the ATO also requires proof, something many people don’t offer.
“Where people make genuine mistakes, we simply disallow the claim. But when people are deliberately making dishonest claims, particularly for large sums, we will disallow the claim and may impose a penalty,” Ms Foat said.
“We want people to understand what expenses they can claim and receive every dollar they are entitled to. But making incorrect claims that are personal or private take funding away from providing essential community services, and that’s not ok.”
More than one million Australians had already submitted their tax returns within the first couple of weeks of July – a near 100% increase on the number of returns submitted by that time last year.
The sheer number of returns being submitted is due to the anticipation of receiving the Government’s tax refunds, worth up to $1,080 depending on income.
But the ATO warns taxpayers the money hitting their bank accounts will be delayed if it has to sort out suspicious deductions.
Particularly dodgy ones may also incur a hefty fine.
The @ato_gov_au has received over 1 million tax returns for the 18/19 year!— Josh Frydenberg (@JoshFrydenberg) July 11, 2019
As of this morning over 1.1 million tax returns have been lodged compared to around 600,000 at the same time last year. Despite Labor’s opposition, Australians have now got the tax cuts they voted for!
Great to see Australians responding to the tax cuts we were able to pass through the Parliament last week that will make life that little bit easier for hard-working Australians. pic.twitter.com/fzFXtGqK7a— Scott Morrison (@ScottMorrisonMP) July 9, 2019
The ATO’s top 5 most ridiculous claims
Here are the five deductions the ATO considers to be the most absurd it received last financial year.
Lego sets and sporting equipment for their children
“One taxpayer claimed the cost of the children’s Lego kits purchased throughout the year. Others claimed for sporting equipment of membership fees for their child athletes,” Ms Foat said.
“We disallowed these claims in full.”
An entire car
“Many taxpayers tried to claim the purchase of a brand new car. These claims, in excess of $20,000 each, were disallowed as purchasing a private vehicle is not an allowable deduction.”
The ATO has recently started cracking down on car-related deductions as they make up 40% of all work-related claims.
Costs of raising children
“One taxpayer made a claim for ‘the cost of raising twins’, while another claimed for the cost of raising three children.
“One taxpayer was obviously shocked at the cost of having children, simply stating ‘New born baby expensive’ when making their claim.
“We explained to these taxpayers that these are unacceptable deductions and disallowed these claims in full.”
“Many taxpayers used ’other deductions’ to make claims for dental or medical care.
“Unfortunately, these expenses are not a deduction as they are a private expense. We disallowed these claims in full.”
A $58,000 wedding reception
This one doesn’t really need much explanation – it’s hard to think of a scenario where a wedding could be considered a work expense.
“We disallowed the claim in full.”