ATO Crackdown: When Work-Related Deductions Go Wrong

A Recent Tax Case You Should Know About

A taxpayer’s (engineer) claims for over $61,000 in tax deductions were denied by the Australian Tax Office (ATO). The engineer worked from home 2 days a week and claimed car, travel, clothing and home office expenses in his 2023 taxes. The Australian Review Tribunal (ART) supported the ATO’s decision to deny the claims in work-related expenses primarily because he failed to adequately substantiate them. The tribunal identified several specific issues across different categories of his claims, including missing documentation (e.g. receipts) and retrospectively completed logbooks with inconsistencies across filings. Beyond the denial of the deductions, the ART upheld penalties for making false or misleading statements. Although the Commissioner had already remitted the penalty to 20%, the tribunal declined to remit it further, noting that the original penalty for recklessness was 50%

The ATO’s Rules on Claiming Deductions

To have work-related deductions approved by the ATO, you generally need to satisfy three basic rules:

1. you must have spent the money yourself without being reimbursed,

2. the expense must directly relate to earning your income,

3. you must have a record to prove it

The recent tribunal rulings highlight common reasons why the ATO might disallow claims even if you have some records:

• Car Expenses (Logbook Method): If using a logbook, it must be completed at the time of travel). Logbooks created after the fact or those that conflict with independent records (like car service receipts) are likely to be disallowed.

• Travel (Taxis/Rideshare): Documentation must include the date, time, and destination of the travel to prove it was work-related.

• Reimbursements: You cannot claim a deduction for any expense that was reimbursed by your employer. If the ART finds you cannot clearly identify which expenses were reimbursed and which were not, the claims may be denied entirely

Need help with your deductions?

This case is a strong reminder that even genuine work-related expenses can be denied if they are not properly documented or don’t meet ATO requirements. Getting it wrong can lead not only to lost deductions, but also potential penalties.

At Addition Accounting, we help you claim everything you’re entitled to, while ensuring your records and reporting meet ATO standards. Whether you’re unsure what you can claim, need help organising your records, or want peace of mind at tax time, our team is here to support you.

Get in touch with Addition Accounting today to ensure your next tax return is accurate, compliant, and working in your favour.