Document 178127

How to Substantiate You
our Tax Claims and Maximise Tax Deductions
We hope that the following enables you, the taxpayer, to derive three main benefits: 1.
Help you get the maximum total of tax deductions available to you;
Help you organise your tax affairs with ease….so you’ll be able to receive your refund more quickly; and
Allow you to minimise the risk of problems in the event of an audit by the Australian Taxation Office.
How to Organise Your Documentary Evidence
While the ATO has nothing official to say about how you organise your receipts, there are some commonsense ways of
creating a system that will allow you to collate, access and store your receipts with ease:
Buying a refillable display book for about $ 3.00 from your local office supplies store or supermarket; and
Storing receipts relevant to your needs in chronological order with the most recent receipt at the front of the display
This system is cheap, simple, easy to store and portable. It should preserve your documents for at least the five years the
ATO requires them to be kept.
You may consider alternatives such as paper envelopes, manila folders, expanding files and document spikes, etc.
Nature of Documentary Evidence
Receipts, invoices and other documentary evidence must: •
Be in English or the language of the country where the expense was incurred;
Have the date on which the expense was incurred;
Name the person or business who supplied the goods and services;
Show the amount of the expense in the currency in which the expense was incurred;
Give details of the nature of the goods or services; and
Show the date the document was made out.
Note - A cheque butt alone is not regarded as suitable documentary evidence.
Apportionment – Work Use or Private Use
Many claims for deductions are made where expenses are both for work and private purposes.
apportioned between work and private use.
These should be
In order to establish a pattern of usage you should maintain a diary for a period of at least one month. The diary can then be
used to substantiate your claim, together with the relevant receipts and invoices.
The diary should show all usage for the period and clearly set out the purpose (private or work use) in respect of each
individual entry. Your claim can then be calculated by applying the percentage or work use established in the diary.
If you can’t provide documentary evidence when required, you may be charged penalty tax on the claims you can’t
substantiate, plus interest of approximately 20.00 % per annum.
Deduction Guidelines
You can claim deductions for work related expenses you incurred while performing the duties of your job. Generally, a work
related expense is incurred when you have spent the money, paid by cheque or credit.
The basic rules to consider before you decide to make a claim are: •
You must incur the expense in this tax year;
The expense must not be reimbursed by your employer;
You must incur the expense in the course of earning your assessable income. You cannot claim expenses of a
private, domestic or capital nature, for example, the costs of normal travel to and from work and buying lunch each
If your total claims exceed $ 300.00, keep written evidence to prove the total amount, not just the amount over
$ 300.00;
The $ 300.00 limit does not include claims for car, meal allowance, award transport allowance and travel allowance
expenses. Generally, you must have written evidence to prove your claims for these expenses; and
You need to be able to show how you worked out your claims if the total claimed is $ 300.00 or less – you do not
need written evidence.
Receiving an allowance from your employer does not automatically entitle you to a deduction – you must still meet the above
rules to make a claim. You can only claim the total amount you incurred even if the allowance is more, for example, if you
received a tools allowance of $ 500.00 and your tool expenses were $ 400.00, the deduction you can claim is $ 400.00.
How long you need to keep your records
You must keep your written evidence for five years from 31 October or from the date you lodge your tax return, whichever is
If, at the end of this period, you are in a dispute with the ATO that relates to a work expense or depreciation claim, you must
keep the relevant records until the dispute is resolved.
For depreciation expenses, you must keep records for the entire period over which you depreciate an item and five years
from the date of your last claim.
Claiming car expenses
Do you have any car expenses relating to your work? Generally, the cost of travelling between home and work is a private
expense and is not an allowable tax deduction. Just because you are on call, work unusual hours or you use your car
because public transport is unavailable, does not change this general rule.
Itinerant work
If you are engaged in itinerant work you can claim a deduction for motor vehicle expenses you incur during work related
travel. Not all building workers are engaged in itinerant work. Your work will be considered itinerant if you regularly travel to
two or more work sites each day before returning home.
Simply travelling to different work sites each day does not mean you are engaged in itinerant work.
If you are claiming a deduction for motor vehicle expenses on the basis that you have been engaged in itinerant work, you will
need to keep records to show that your work pattern was itinerant. These records could be a diary, a logbook or a similar
document that shows your itinerant travel pattern.
Motor Vehicle – Carrying of bulky tools & equipment
If you use your motor vehicle to carry bulky tools and equipment that you use to do your work and you cannot leave them
securely at the work site, you may be able to claim a deduction for your motor vehicle expenses. You will need supporting
records to show why the tools and equipment are considered bulky.
You may also claim the cost of using your car to travel directly between two separate places of employment – for example
when you have a second job.
You can also claim the cost of using your car to travel:
From your normal workplace to an alternative workplace while still on duty and back to the normal workplace or
directly home; and
From your home to an alternative workplace for work purposes and then to your normal workplace or directly home.
Further, if you receive Austudy, you can claim the cost of using your car to travel between your place of education and your
place of employment.
Note: you can use one of four methods to work out your car expenses. In broad terms the more business kilometres you
travel,, the more likely you’ll benefit from keeping a logbook.
Travel Expense Records
You can claim travel expenses directly connected with your work. If your travel was partly private and partly for work, you
may claim only the part that related to work.
Travel expenses you may be able to claim include meals, accommodation and incidental expenses incurred while travelling
overnight for work, ie. Going to an interstate conference. Generally, if your travel does not involve an overnight stay you
cannot claim for meals, even if you received a travel allowance.
Other travel expenses that you may be able to claim include air, bus, train, tram and taxi fares, bridge and road tolls and
parking and car hire fees.
To substantiate your claim, the records you need include receipts, invoices or other travel documents that prove your travel
expenses (including meals and accommodation).
We recommend you maintain a travel diary to help you substantiate any such trip.
Computer software
Computer software used for the production of income should be amortised at 40 per cent per year.
You can make tax-deductible donations to organisations, including charities that give help in Australia, overseas aid funds,
approved school building funds, public libraries, art galleries, museums and certain cultural/environmental organisations.
Home office expenses
You can claim expenses for home office equipment such as answering machines, beepers/pagers, computers, furniture and
stationery. If any item costs more than $ 300.00 and has an effective life greater than three years, you cannot claim the cost
as an immediate expense. You should claim depreciation.
If you have an office in your home, you may claim a portion of your gas, power and heating/cooling costs. The percentage
claimable is determined by expressing the area of your office as a percentage of the area of your home.
Journals and magazines
Instead of buying work-related journals and magazines on a random basis, consider arranging subscriptions.
Invoices/renewals provide documentary evidence, otherwise, obtain receipts.
Also, instead of buying work-related newspapers on a random basis, consider arranging for home delivery. Accounts will
provide documentary evidence, otherwise, obtain receipts.
Medical expenses
A rebate exists for 20.00 % of all medical expenses incurred over $ 1,500.00. In order to maximise the rebate, have one
taxpayer claim all of the family’s medical expenses. Medical expenses include pharmaceutical expenses relating to an illness.
They can also include payments for dentists, orthodontists, registered dental mechanics, opticians or optometrists.
Professional library additions
Taxpayers engaged in professional practices can claim deduction expenses for additions to professional libraries. For
example, a solicitor may claim the purchase of a set of law reports, while an academic may claim the purchase of a textbook.
Items which cost more than $ 300.00 and have an effective life of more than three years should be claimed as depreciable
Seminars and conferences
You can claim the cost of attending seminars, conferences or education workshops that are connected to your work
activities. This includes registration and travel to and from conferences. If you travel interstate to conferences, or
conferences include a residential course, you may also claim meal and accommodation costs.
Self education expenses
1. Books, Stationery, Photocopying, etc.
Self-education expenses are expenses related to a course of eduction provided by a school, college, university or other place
of eduction. In this category you should list expenses such as textbooks, technical instruments and lecture pads. You
cannot claim a deduction if the purpose of the self-education is to create a new income source or to get a new job.
2. Course Fees & Union Fees
If you attend an educational institution you can claim course fees and student union fees providing you are not attending the
course in order to obtain a new job.
3. Travel
The following examples show whether travel is deductible: •
Travel from home to school
Then to work from school
Travel from work to school
Then back to work
Travel from school to home
Telephone expenses
The cost of installing a home telephone used for business is a non-deductible capital expense. However, you may be able to
claim part of the costs of phone rental if you are required by the terms of your employment to be on call, or are required to
phone your employer or clients on a regular basis.
You may also be able to claim the cost of calls from your phone if you make them in the course of your employment. A diary
can be used to establish a pattern of business phone usage.
Identify work-related calls from an itemised telephone account. Otherwise, reasonably estimate call costs by diarising calls
over one month.
Tools of trade
In general, the cost of insuring, repairing or replacing tools of trade will be fully deductible. If a tool costs less than $ 300.00,
it may be treated as an immediate deduction. If the cost is greater, it must be depreciated.
Protective and Occupation Specific Clothing
You may be able to claim the cost of renting or buying protective or occupation-specific clothing. This includes clothing that
protects you from injury during work ie. safety boots, and clothing specific to your occupation but not everyday in nature.
For example, a minister’s robes would be allowable. A waiter’s white shirt and black pants would not be allowable.
You can generally claim the cost of buying or renting a uniform that is unique and distinctive to your organisation. This
includes registered non-compulsory uniforms and compulsory work uniforms not available to be worn by the general public.
Ask your employer whether your uniform is registered.
Laundry expenses
You can claim the cost of washing, drying and ironing some work specific clothing. A reasonable basis to estimate your
costs is deemed to be $ 1.00 per full load or 50 cents per load if non work related items are included. If total laundry claims
exceed $ 150.00 you will need to keep a diary and receipts. To claim dry cleaning costs you must also keep receipts.
Insurance premiums
You may claim the cost of insurance premiums where the purpose of the expenditure is to receive compensating payments
for the loss of income during a period of disability. Professional indemnity policy premiums may also be claimed as
Dividend/Distributions Received
You should keep statements from any company, corporate trust or public trading trust that pays you dividends or
distributions. These statements will show the amount of franked and unfranked dividends that you received and the amount
of any imputation credits paid and the tax (TFN amounts) deducted from unfranked dividends.
Interest received
You need to record any interest you were credited with from financial institution accounts and term deposits. You also need
to record any interest credited from the Tax Office for overpayments. In the case of joint accounts, show only your share of
the interest.
We hope that the above summary helps you to understand the substantiation requirements & some of the possible tax
deductions that may be available. We bring to your attention that this list is not an exhaustive one and should you have any
further queries, please do not hesitate to contact our office.
For more information on tax deductions,
deductions, contact ZJL Partners on (03) 9547 5022.
Suite 6, First Floor, 49-54 Douglas St, Noble Park VIC 3174
PO Box 331, Noble Park VIC 3174
Tel: 03 9547 5022 Fax: 03 9547 0595 Email: [email protected] Website:
Please note this article is for information purposes only and does not constitute legal advice
Liability limited by a scheme approved under Professional Standards Legislation