Engineer who claimed $60k in WFH, car deductions loses court fight

The Administrative Review Tribunal (ART) has upheld the ATO’s assessment that a Perth-based engineer wrongfully claimed $61,286 in expenses and tax deductions for an income year where he earned $155,747 in salary and wages.

On Wednesday (11 February), the tribunal ruled in favour of the Commissioner of Taxation, who disallowed a majority of the man’s deductions.

The man, who worked under a hybrid arrangement, claimed various expenses for his home office, including renovations and utilities. He also claimed hefty work-related car expenses, as his work required him to conduct site visits.

After an audit in December 2023, the ATO issued an amended assessment to the taxpayer, which disallowed his deduction claims for work-related car expenses ($11,130), work-related travel ($5,347), work-related clothing ($1,820), self-education ($4,513) and interest expenses ($15,407).

The Commissioner allowed $1,382 of his $17,726 claim for ‘other’ work-related expenses, and $68 of his $5,316 claimed in donations. They opted not to apply an additional penalty of $5,034.

In March 2024, the engineer disputed the ATO’s assessment, arguing that he had not correctly submitted his supporting documents, leading to the “confusion.”

“I was not informed of any specific requirements regarding the format in which these documents needed to be provided,” he wrote in his objection form.

“Had I been made aware of these requirements, I would have ensured that my documents were submitted in the correct format to avoid any confusion or discrepancies.”

Following the man’s objection, the commissioner allowed a further $129 in travel expenses and $779 in work-related expenses in December 2024.

Regarding the $11,130 claimed for car expenses, the ATO argued that the taxpayer had not appropriately documented the expenses and that his logbook did not comply with legislative requirements. Further, some of his expenses had already been reimbursed by his employer.

The engineer was under a hybrid working arrangement where he worked two days from home. However, he worked from home full-time between July and December 2022 due to extenuating personal circumstances.

Part of the $17,726 claim for his ‘other’ work-related expenses related to renovations of his home office. He also claimed $2,826 in home utility expenses as a work-related deduction – approximately 70 per cent of his household’s utility bill.

ARTA determined that this was excessive and likely covered non-work-related bills.

“The household included the Applicant, his spouse, 2 school-aged children and his elderly parents. In those circumstances, it is reasonable to infer that the utilities were used for ordinary household purposes by multiple occupants,” court documents read.

“The Applicant claimed approximately 70 per cent of the relevant expenses as work-related. Notwithstanding at the work area was said to be physically separate from the main residence, I'm not satisfied there is an evidentiary basis supporting that level of work-related use.”

As part of his self-education expenses, the taxpayer also sought to claim a deduction of $140 with respect to an Iranian language class.

“The Applicant was employed as an engineer. No evidence was provided to demonstrate how the language course maintained or improved skills required for that role, or was otherwise sufficiently connected to the Applicant’s income producing activities,” court documents read.

“It is not enough that a course may generally improve some skills or knowledge.”

Overall, ARTA concluded that the taxpayer had failed to substantiate the reasoning behind his hefty claims and upheld the ATO’s assessment that most of his $60,000 in deductions could not be substantiated.