Agents warned about dodgy tax claims

The Real Estate Institute of Australia has written to its members urging them to comply with tax rules covering work-related expense tax deductions.

This follows the ATO’s announcement ahead of the end of financial year on June 30, 2011 that it will pay close attention to work-related expense claims made by real estate employees along with members of other professions including carpenters, joiners and apprentices and trainees.

On June 14, tax commissioner Michael D'Ascenzo warned the real estate industry is considered high-risk in terms of wrongfully claimed work-related expenses.

In its July newsletter, REIA policy manager Jock Kreitals writes that real estate agents have been identified as having relatively high amounts of work-related expenses.

“Work-related expenses are expenses you incur in performing your job, such as the purchase of equipment or tools, expenses related to your home office and mobile phone. You can claim these expenses in your tax return,” he says.

“However, you cannot claim private expenses, travel to and from work, or an expense that has been reimbursed by your employer.”

Estate agents are also reminded that if they claim more than $300 in expenses they need to keep written records of all their expenses for five years.

However, even if their claims do amount to less than $300, agents still need to be able to tell the ATO – if asked – how they worked out their claim.

Agents should also be wary of the following areas, which the ATO has identified as trouble spots for non-compliance.

• Not having detail to explain how kilometres were calculated when using the cents-per-kilometre method to claim travel expenses
• Not having documentation to show when a car was owned or leased
• Using an incorrect code on the tax return when claiming protective clothing
• Claiming sunglasses and sunscreen under an incorrect tax return form label
• Incorrectly claiming self-education expenses for a course that relates only in general way to your employment
• Incorrectly claiming initial certificate/licence when only renewals are deductible
• Not being able to substantiate excessive mobile phone claims
• Not having diary evidence that reflects work usage of computer/laptop use
• Not being able to substantiate the number of hours claimed for use of a home office
• Incorrectly claiming meals and drinks for clients
• Incorrectly apportioning the cost of newspapers – generally only the real estate section is deductible

The ATO provides a work-expenses guide for real estate agents on its website.