Australians are leaving millions on the table at tax time by not knowing what they can and can’t claim.

The average Australian is missing out on an additional $426 in their tax return by not claiming legitimate expenses like transport and phone costs, research from H&R Block has found.

Those unclaimed expenses add up to an astonishing $1.65 billion which could be back in the hands of taxpayers.

Speaking to The New Daily, H&R Block tax communications director Mark Chapman said it was surprising to see how many people weren’t claiming job-related clothing or the use of their car for work despite having legitimate claims.

“We thought things like that were pretty well understood, but people just weren’t making the claims when they had a right to,” he said.

Many Australians also lost the receipts for purchases that could have been claimed, locking them out of additional returns.

Avoid over-claiming

Taxpayers need to strike a balance between claiming everything they’re entitled too, and not overstepping the mark, Mr Chapman said.

For some expenses, such as cars and home offices, working out how much can be claimed can be difficult.

Car expenses can be claimed in one of two ways, Mr Chapman said. The first is to note all work-related trips and claim 68 cents per kilometre from each of these.

The second option is to keep a log-book of all trips for 12 weeks, then work out the percentage of use associated with work.

The second option is more involved, but typically gives taxpayers a better tax return, and a log-book only needs to be compiled once every five years.

Similarly, home office expenses can be claimed by keeping a dairy for four weeks and noting how often you’re working from home, and working out what proportion of time is spent in the home office.

“Then you can use the proportion together with an estimate of the value of the property you’re using for your home office to claim a proportion of the costs of wifi, home phone, heating, lighting, cooling, cleaning and even depreciation on the furniture in your office,” Mr Chapman said.

However, Mr Chapman cautioned taxpayers to seek professional help if they’re unsure about their claims on these expenses, warning that that ATO pays particular attention to home office expenses.

Toys, medical expenses among ‘outrageous’ claims

While most Australians aren’t claiming enough, some have already been caught out trying to claim too much.

The ATO received almost 700,000 ‘other’ expense claims in the 2018-19 financial year, amounting to a whopping $2 billion.

Among these were a number of “outrageous” claims, including dental work, children’s Lego playsets, brand new cars (including one bought as a gift for a family member), and the cost of raising children.

One particularly enterprising taxpayer even tried to claim their wedding reception, though this was not well received by the tax man and disallowed in full.

H&R Block’s research found 6 per cent of Australians made claims they knew they shouldn’t have.

“These claims add up to a lot of money,” ATO assistant commissioner Karen Foat said, “if the deduction isn’t directly related to earning income, we can’t allow it.”

Ms Foat said the ATO wants taxpayers to understand what they can and can’t claim so they can receive every dollar they’re entitled too, but wouldn’t tolerate premeditated attempts to rort money out of the tax office.

“Where people make genuine mistakes, we simply disallow the claim. But when people are deliberately making dishonest claims, particularly for large sums, we will disallow the claim and may impose a penalty,” she said.