The 2018 Federal Budget included measures to improve the integrity of the tax system, with a focus on claims made by taxpayers and their agents.
The Australian Taxation Office (ATO) has flagged a crackdown on claims for work-related expenses (WREs), suggesting a significant loss to revenue from taxpayers overclaiming small amounts.
You should ensure that any unreimbursed claims for work-related expenses, car expenses and travel expenses are correctly allowable on the basis that such expenses were incurred in gaining or producing salary and wages income or other payments subject to the PAYG withholding regime (including any work-related claims below $300.00).
Where items are used both for work or business purposes and for private purposes (e.g. use of a mobile phone or home computer) it is also necessary to apportion deductions so that a deduction is only claim for the business portion of the expense.
In addition, all claims for work-related expenses must be substantiated by way of evidence such as invoices, receipts and credit card statements.
Care should be taken in claiming such deductions as the ATO is increasing its scrutiny of work-related expense claims and is using data analytics to detect deductions which are unusual or abnormally high relative to other persons in the taxpayer’s occupation or profession.
Learn about the ATO's three golden rules for accountants when putting together WREs.
You are not obligated to ask clients to sign a substantiation declaration and using a substantiation declaration with clients does not absolve you of your reasonable care obligations when preparing a tax return.
Nor are you obligated to sight all of a client’s original receipts related to their tax return. Paragraphs 10-12 of the Tax Practitioner's Board Information Sheet on Reasonable Care to Ascertain a Client’s State of Affairs (PDF) says:
“The obligation to take reasonable care does not mean that the care taken needs to be perfect. It is sufficient that the registered agent acts in a way that is consistent with how a reasonable person, possessing the required knowledge, skill and experience of a registered agent, objectively determined, would act in providing tax agent services or BAS services. Where a statement provided by a client seems credible (and for existing clients is consistent with previous statements) and the registered agent has no basis on which to doubt the information supplied, the registered agent may discharge their responsibility by accepting the statement provided by the client without further checking.”