Accounting: Making Sure 2 + 2 = 4

How the ATO Uses Sophisticated Technology to Check Your Work-Related Deductions

4 June 2018

Dwayne Barnes

You may be aware that you can claim a certain number of expenses against your tax return each year, where they are related to your work. It's certainly true to say that many people omit to claim expenses they are entitled to and end up paying more tax as a consequence, and while you don't want to be one of their number, you do need to be careful to ensure that you are "doing it right." If you want to avoid the attentions of the ATO, what type of approach should you take here?

The Power of Software

Bear in mind that the tax authorities have some very sophisticated software and advanced processing power within their head office computers. They feed the data from every single tax return into these machines, so that they can compare what should be typical in a specific industry. This software will then spit out a red flag which will be analysed by a human operative, should something be found that doesn't look right.

This doesn't mean that you cannot make a claim for an expense that is unusual, or that is much greater than somebody in a similar position to you might put on their own tax return. However, it does mean that you need to keep very clear records and be sure that you are claiming these expenses properly, or you may open yourself up to fines and penalties.

Should You Be Afraid?

Some people think that they should always fit in and not put anything on their tax return that may prompt an investigation. While a visit from the ATO is probably not going to be your most welcome chore for that day, you will have nothing to worry about if you have correctly itemised all your deductions and filled in the paperwork correctly.

Specific Rules

Always remember that to claim work-related expenditure you must have incurred the expense yourself and not have been reimbursed by your organisation. You must have a clear record to prove that you paid the money out and it must be related to how you earn your income, to be valid. Sometimes, an expenditure will be related to both private and work purposes and if so, you have to carefully calculate how much of that money was related to work and only claim that deduction on your return.

A Fresh Pair of Eyes

Many people get confused when they are working through all of this expenditure and if you're not entirely sure, it may be best for you to get in touch with an accountant first, before you submit to the ATO.

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