Amongst the Australian Tax Office’s targets this year are work-related deductions – especially relating to fly-in-fly-out (FIFO) workers. So how can you avoid getting caught in the net?
The obvious answer is to not to do the wrong thing. Well, that’s always a good start – but the rules around deductions for FIFO work have been changing recently, and they’re not always easy to decipher at the best of times. We’ve put together a brief guide to avoiding problems with the ATO when it comes to your FIFO tax claim.
The ATO like benchmarks
Historically speaking, the ATO tend to target tax returns that fall outside the benchmarks set for a particular sector. Simply put: if your deductions are significantly higher than the average for FIFO workers, you have a good chance of being audited.
Keep your records perfectly
We’re not saying that you shouldn’t claim deductions if you’re entitled to them – no way! But we do recommend – very strongly – that you keep your substantiation records meticulously. Keep your receipts. If you’re claiming on private goods (phone, cards, internet access, working from home), then ensure that you have a signed declaration from your employer to say that your use of these was necessary. As a side point – you can save a lot of time and, often, money if you can bring all of your deductions information to your accountant in a summary document of every source record and log book entry.
Know the rules around travel claims
One area that can trip up FIFO workers is the lack of clear direction from the ATO on what travel expenses can be claimed. Once upon a time, you could claim travel costs from your home to your work destination. However, the 2012-2013 financial year’s budget release specifically stated that these expenses are not deductible. There is a possible exception to this rule: if your contract specifically states that you start work – and hence start getting paid – when you leave home, and finish work when you return home, then you might be able to claim the full travel expenses as a deduction.
There are two ways that your employer can reimburse you for these costs:
- Include the reimbursements as income on your group certificate: If your reimbursements are counted as income, then they need to be declared as such on your tax return, and all deductions may be claimed for the expenses.
- Handle it as a fringe benefit: If your employer doesn’t include travel reimbursements as income on your group certificate, then it is counted as a fringe benefit and the employer pays fringe benefits tax on the amount. You don’t need to declare it as income, but you can’t claim any deductions either.
The ATO provide a handy little tool for recording and calculating your deductions on mobile devices. Check it out on the ATO website.
The ATO has some useful videos on the subject of work-related expenses:
Ensure that you know the rules around deductions for FIFO workers, and ensure that you keep your paper trail for every deduction that you claim. Beware of shopping around tax agents for the one that will give you the ‘best deductions’ – this could just bring you to the attention of the ATO.