Nick Bruining: H&R Block reveals the year’s most outlandish tax claims

Edible undies as a potential tax deduction? Let’s just say, that it depends on your occupation.

H&R Block’s annual list of allowable weird tax deductions has just been released and this year’s menu includes garden gnomes, gym memberships and depreciation and other expenses associated with your dog.

Those listed on the “nice try mate” list and rejected, include martial arts courses for bouncers, breast enhancements and depreciation on poodles.

Mark Chapman from H&R Block says that some of these more novel claims are allowed as a tax deduction because they meet the fundamental test of deductibility.

“You must be able to demonstrate that the expense has a direct connection to earning your income.” Says Mark Chapman

Taxi drivers can claim expenses like fuel and sex workers can claim the cost of the items associated with generating their income, but not when it is of a personal nature.

And while your ears may have pricked up like Rover’s at the thought of a tax deduction for your mutt, your occupation and the animal must link up. Guard and farm dogs are allowed for those in those industries, but not for others.

Similarly garden gnomes that help to land a tenant in your rental property can be claimed, but not if they switch houses in the middle of the night and end up in your own front yard.

You also can’t double dip.

“This has to be a genuine personal expense and can’t have been reimbursed by an employer. You also need to able to substantiate the actual outlay with receipts, invoices, or similar documents that clearly detail the nature of the expense.” Says Mr Chapman

For those that missed the October 31 deadline to lodge their return or perhaps, are a few years behind, you can still lodge your return now.

Being pro-active instead of waiting for a letter from the ATO, puts you in the best bargaining position as far as penalties go.

You can utilise the services of a tax agent to ensure you still get the relevant tax deductions but if your affairs are simple, you can do this and previous years online and for free via the MyGov portal.

In the event that you do cop a penalty, a call to the ATO explaining your circumstances will often see the penalties waived – if you were on the front foot.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association