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The myth of claiming everything on tax

IF I go to one more barbeque and hear about how business owners can 'claim everything on tax', I will have to scream.

Now, I've been around long enough to know that on some occasions, things are claimed that perhaps shouldn't be. But the widespread impression is that the business owner is able to live out of the business with no tax consequences - and this is not true.

Business owners and employees are subject to the same tax laws, and the underlying principles are the same. Admittedly, business owners have the option of structuring their affairs a little differently to reduce the tax that they pay, but in no world does this translate to being able to 'claim everything'.

I often hear stories of taxpayers who supposedly claim wild expenses like luxury cars, movie tickets and fancy dinners. I also hear stories of people who drive while drunk, steal from a corner store and claim Centrelink benefits that they're not entitled to...but that doesn't make any of the above legal (or a smart idea!).

Pushing the envelope is a national pastime, but we need to keep everything in perspective, and you still need to be able to sleep at night - we all have our limits.

All of the above situations mentioned are things you actually could claim - movie tickets are claimable if they were a prize or a promotion for your customers, and a fancy dinner while you were away for work could be claimable. The luxury car is a bit of a stretch...but in the right circumstances, it's doable.

The thing to remember is that you need to establish a relationship between the expense and some income-earning activity. The fact that work drives you to drink does not mean you can claim a carton of beer!

Like many things, the seriousness of the indiscretion does affect the penalty. Small amounts of doubtful deductions will provide you with small benefits, and if you are caught, you should hopefully only get a small penalty. If you want to really make it worth your while, you need to be comfortable with the possibility of significant penalties...which in extreme cases could even include jail time. Think about that as a tax-payer funded holiday!

All that said; it's important that you claim as much as you (legally) can! It is a wise investment for you to consult a professional to find out exactly what you can claim, and whether there is a better way to structure your financial dealings to minimise your contribution to the government's coffers - because you know they're going to waste it anyway!

Topics:  allan johnson opinion tax



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