The Client Who Wants to Expense Something They Shouldn't

07 September 2026·4 min read

Quick answer: When a client wants to claim something that isn't a legitimate deduction, the goal is a calm, factual conversation — not a lecture. Explain the rule plainly, explain the real risk to them personally (an audit lands on their return, not yours), offer an alternative if one genuinely exists, and document that you advised against it. Most clients back down once they understand it's their exposure. 💖

It happens in nearly every firm: a client wants to run a family holiday through the business, or claim a laptop mostly used by their teenager. The instinct is either to quietly wave it through to avoid an awkward moment, or shut it down so firmly the client feels accused. Neither serves them well. ✨

What most firms get wrong

Making it about the rules, not the risk — "you can't do that" invites a client to argue the rule. "Here's what happens to you if this gets reviewed" doesn't.
Going along with it to keep the peace — a quiet yes protects the relationship short-term and exposes both the client and the firm's reputation long-term.
Not documenting the advice given — if a client insists despite your advice, a verbal warning with no record is hard to point back to later.
Treating every grey area the same — a genuinely borderline claim deserves a different conversation than a clearly personal expense.

The three-part conversation

1. State the rule plainly. "For this to be deductible, it needs to be used for the business — not have some business use mixed in with mostly personal use."

2. Name the actual risk to them. "If this gets flagged, it's your return under review, and the penalty sits with you as the taxpayer, not with us."

3. Offer the legitimate alternative, if there is one. "What you can claim is the percentage that's genuinely business-related — want me to help you work that out properly?"

Then follow up in writing: "Confirming our conversation today — I've advised that [item] doesn't meet the deductibility test because [reason], and recommended [alternative]. Let me know if you'd like to discuss further."

The tone shifts slightly depending on the client and the claim. 📈

The genuinely grey area: A client working from home wants to claim their whole internet bill. You explain the apportionment rule and help them land on a defensible percentage — an easy, collaborative fix.

The clearly personal expense: A client wants to claim a family overseas trip as a "work conference." You're direct: it doesn't meet the test, here's the actual risk, and here's the email confirming you advised against it.

The repeat offender: A client who keeps pushing similar claims each year gets a slightly firmer version of the conversation, plus a note that repeated disallowed claims increase audit risk for future returns too, not just the current one.

Please note: general information, not tax advice — deductibility rules are specific to each client's circumstances, so check current official guidance before relying on any of this.

When to walk away from the engagement

If a client insists on lodging a claim you've advised against, most firms' engagement terms allow you to decline to prepare or lodge that specific claim, or in repeated cases, to end the engagement. This isn't about punishing the client — it's about your own professional obligations, which don't bend to a client's preference.

💡 Heads up: A short line in your engagement letter about your obligation to prepare returns accurately (and that you can't lodge claims you believe are non-compliant) makes this conversation easier when it comes up — the boundary was set before the awkward moment, not during it.

Mistakes to avoid

Sounding shocked or judgemental — most clients aren't trying to defraud anyone; they've just heard a rumour about what's claimable. Match the tone to that.
Skipping the written follow-up — a verbal-only warning is far weaker evidence than a dated email.
Letting one claim slide to avoid conflict — it rarely stays a one-off, and it sets a precedent for what the client thinks is acceptable.

Frequently asked questions

What if the client goes ahead and claims it themselves, without telling me?

If you've prepared the return, your documented advice protects you professionally. If they've lodged separately or altered figures after you've prepared them, that's a more serious conversation about whether you can continue to act for them.

Is it ever worth reporting a client?

This depends on your professional obligations and the severity of the conduct — check your professional body's current guidance on this, as the thresholds and requirements are specific and it's not a decision to make on gut feel alone.

How do I raise this without sounding like I'm accusing them of doing something dishonest?

Frame it around the rule and the risk, not their character: "the ATO's test for this is quite specific, and this wouldn't meet it" lands very differently to "you can't do that."