ATO warns estate agents to be vigilant with tax claims

Real-estate agents will need to ensure that they fully understand the rules governing work-related expense claims when they file their 2011 tax returns.

The ATO says it will “pay close attention” to claims made by real-estate employees along with a number of other professions including carpenters, joiners and apprentices and trainees.

Estate agents will be among 116,000 taxpayers the ATO will write to in the countdown to the June 30 end-of-financial-year mark.

“We have found people in these industries are at higher risk of getting their work-related expense claims wrong due to the type of deductions they are entitled to claim, such as motor vehicle and travel expenses,” a spokesperson for the ATO says.

Among the errors targeted are failing to keep a log book or receipts for car expenses, and wrongly claiming for mobile phones.

“It is important you keep records for claims totalling $300 or more as, if you cannot prove your claim, you will not be entitled to the deduction and you may have to pay a penalty,” the spokesperson says.

Institute of Chartered Accountants tax counsel Yasser El-Ansary says work-related deductions are sometimes incorrectly claimed because the laws in this area are complex and often “a shade of grey”.

“It is important to think carefully about your circumstances… If you’re self-preparing your return, make the decision on whether or not you’re eligible for a deduction on the basis of all the different guides and products available through the Tax Office’s website,” El-Ansary says.

“They do prepare a lot of written material and, for self-preparers, that written material is invaluable in assisting them to understand whether or not they are able to claim something.”

In most situations, estate agents can claim deductions for work-related expenses as long as the expense is incurred in doing their job, the expense is not private and evidence of the expense being incurred can be shown by producing receipts or other written evidence.

Evidence is required to show the full amount of a claim has been incurred, not just the amount over the first $300.

For claims under $300 or less, receipts are not required, but agents must be able to show how they worked out their claims.

The ATO recommends that when storing written documentary evidence, agents photocopy the original since receipts can fade when exposed to heat and sunlight.

It provides the following example:

Marco claims his car expenses through the logbook method, and does not need to keep the receipts for fuel and oil but he does need to keep receipts for repairs and maintenance.

He photocopies the thermal paper receipts to protect the information. The photocopies contain the required information and are a true and clear reproduction of the original. This copy would be sufficient evidence to support his claims.

Estate agents should also be aware that if they are claiming a deduction for an expense incurred for something used partly for work and partly for personal purposes (such as mobile phone costs), they can only claim that portion of the expense that relates to business use.

Written evidence of work-related expenses must be retained for five years from the due date for lodging a tax return. If you lodge your return after the due date, the five years start from this later date.

For depreciating assets, records must be kept for a further five years from the date of the last claim for decline in value.

Every year, about 8 million people claim about $16 billion in work-related expenses.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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