Tax

ATO commissioner vows to fight the “tax gap”: Here are the work claims in the firing line

Emma Koehn /

Australia’s tax commissioner has sounded a warning to individuals and business owners who have been claiming deductions they are not entitled to, as the ATO pledges to address the nation’s ‘tax gap’.

Chris Jordan addressed the National Press Club on Wednesday, crunching the numbers on key deduction categories and vowing to recoup dollars from “incorrect” claims around work travel, uniforms and expenses related to earning an income.

The commissioner says the large market corporate tax gap, or the distance between what corporates owe and actually pay, is estimated at $2.5 billion annually, while workers and self-employed people filing their own returns are also over-claiming in significant volumes.

While Jordan opened his speech with the reflection it was “a great time to be the commissioner of taxation”, the tax office continues to face challenges relating to its systems, experiencing a six-hour outage on Wednesday afternoon after it noticed intermittent service disruptions.

In a statement released yesterday, the ATO said it wanted to “set the story straight” on the concerns, explaining the issue had nothing to do with recent hardware issues that have plagued the office in the first half of 2017.

“We identified intermittent system issues early this afternoon affecting our mainframe and impacting on our services to the community. This was caused by applications running incorrectly. We took controlled action to reboot our mainframe and resolve this issue,” the ATO said in a statement.

While services were back up and running for the peak tax return filing time of 8:00pm last night, the ATO was met with digruntled tax professionals and individuals trying to lodge returns yesterday.

Users were mostly keen to acknowledge that frontline ATO service staff were doing the best job they could, and there was some humour in responses: “I wish you had a decent competitor,” said one client on Facebook.

Changing ”attitudes” on claims

Jordan hit out at taxpayers who believe they are able to skate the limits of acceptable claims because they feel others are doing the same.

“These views are people justifying their own behaviour by assuming mischief by someone else; and thinking no one else gets hurt by their non-compliant behaviour,” he said yesterday.

In the firing line are claims made by individuals and self-employed business people around uniform deductions, business travel and work-related expenses that have simplified calculation formulas, like petrol use per kilometre.

In the 2014-15 financial year, $22 billion dollars was claimed in work-related expenses, a figure Jordan says includes a large volume of people claiming a little more than they should.

“While each of the individual amounts over-claimed is relatively small, the sum and overall revenue impact for the population involved could be significant – in the vicinity of, or even higher than the large market tax gap of $2.5 billion,” he said.

Uniform and clothing claims are also in the firing line, with the tax office highlighting $1.8 billion was claimed for uniform expenses in 2014-15: A figure Jordan says is way too high to be reasonable.

“That would mean that almost half of the individual taxpayer population was required to wear a uniform or protective clothing or had some special requirements for things like sunglasses and hats. While many of these claims would be legitimate, I wonder how many people have assumed that they can just claim $150 regardless of whether or not they have spent that amount on the required items?”

Taxpayers also need to better understand when they can claim use of vehicles for their own work or while working for an employer.

Over the past three months, the ATO has also sounded an alarm on travel and self-education expenses, with accounting professionals warning business owners to always make the link between their expenditure and what it contributes to their jobs.

A spokesperson for the tax office has previously told SmartCompany it is also putting the spotlight on self-employed people, saying it “is generally concerned that some individuals may be seeking to claim travel and other expenses as an itinerant worker where they are not entitled to do so”.

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Emma Koehn

Emma Koehn is a former senior SmartCompany journalist.