In the bad old days before the self- system was introduced, an income tax assessor checked every return, and special attention was given to claims for work related expenses.
The assessors had to memorise the amounts the Commissioner considered to be reasonable for each industry, and if you claimed more than the acceptable amount, you were asked to explain how you arrived at the amount claimed.
With the onset of the self-assessment system, the amounts claimed for work expenses soared, and the substantiation provisions were introduced.
If you do not have the receipt (written evidence) - you do not get the deduction
No receipts necessary for Motor Vehicle Expenses - Fuel and Oil
Section
900-15 (2) you can claim the expenses for fuel and oil even if you NOT have receipts (written evidence) if you keep odometer records. (The rationale for this is that the odometer records will enable you to estimate the cost with some degree of certainty).
Travel Expenses - not only receipts, but also a diary...
but if you play your cards right, you might not have to.
If your travel involves you spending 6 or more nights in a row section
900-20 requires travel records (in addition to the receipt Just exactly what travel records are is set out in section 900-150
The purpose of a travel record is to show which of your activities were undertaken in the course of producing your assessable income, so that your losses or outgoings, or portions of them, can be attributed to income-producing purposes.
You record an activity by specifying in a diary or similar document:
(a) The nature of the activity;
(b) The day and approximate time when it began;
(c) How long it lasted;
(d) Where you engaged in it.
An activity must be recorded before it ends, or as soon as possible afterwards
You might not have to get the evidence (receipts) if...
Your employer pays, or reimburses you for a transport expense under the terms of an industrial award (industrial instrument that was in force on 29 October 1986, to give it it's correct title - refer section 900-215 for the full story). In other words, the allowance is included in your assessable income, and the deduction is allowed up to the allowance, without you having to substantiate it with receipts.
Section 900-50 Travel Allowance expense for travel within Australia The Commissioner considers that the allowance was reasonable after taking into account the costs you would be required to incur for…
Accommodation
Food and drink
Incidentals
…then, the allowance is included in your assessable income, and the deduction is allowed up to the amount of the allowance, without you having to substantiate it with receipts.
Almost the same concession applies to foreign travel. There are 2 differences...
section 900-55 (1) : you will still need evidence (receipt for accommodations costs
section 900-55 (3) : you will still need a travel record (diary, unless you happen to be a crew member of an aircraft engaged in international travel, the travel is principally outside Australia and you are not claiming more than the allowance. See section 900-65
No receipts necessary for Clothing laundry expenses - if less than $150
Section
900-40 allows a claim of up to $150 for washing, drying or ironing clothes, but NOT dry cleaning.
Answer this question….
Can a taxpayer can claim $150 worth of laundry and $300 worth of other work expenses without the need for receipts?
Yes
No
Refer section
900-40 ( Section 900-40 (2) makes it clear that the $150 laundry amount can not added to the $300 receipt free zone stipulated by section 900-35.
No receipts necessary for Meal Allowances expenses
If you work overtime
And you are paid an allowance to purchase food or drink in connection with the overtime and receive a meal allowance (under the terms of an industrial award)
The Commissioner thinks the allowance is reasonable
…Then section 900-60 relieves you of the need to obtain receipts for the food a drink purchases with the allowance money.
Do it yourself receipts: $200 worth of
'
$10 or less' expenses
Section
900-125 allows you to make a record of expenditure if you had less than $200 or less worth of expenses under $10.
Answer this question….
A taxpayer has a receipt for $500 for reference books, but purchased a ream of photocopy paper each month for $7.50. He did not keep the receipts for these purchases but recorded
(a) The name or business name of the supplier; and
(b) The amount of the expense
(c) The nature of the goods or services;
(d) The day the expense was incurred;
(e) The day it is made out.
in his diary. Should he claim only the $500 for which he has a receipt?
What if it's just too hard to get a receipt? - Section 900-130 might help
Section
900-130 says that if the Commissioner considers it unreasonable expect you to have got written evidence, you can make your own receipts in much the same way as you would under section 900-125
Answer this question….
These amounts do not have to be under $10 and are not included in the $200 limit
A scientist on a sabbatical in France found it almost impossible to get receipts for the food he buys. He recorded
(a) the name or business name of the supplier; and
(b) the amount of the expense
(c) the nature of the goods or services;
(d) the day the expense was incurred;
(e) the day it is made out.
in his travel diary. Can he claim the full amount of the expenditures?
Substantiation applies to work expenses - do people in business need receipts?
Only if they are claiming expenses for:
motor vehicles
business travel
Section 900-95 defines a business travel expense is a travel expense, in far as you incur it in producing your assessable income OTHER THAN salary or wages.
What is written evidence? (it's just another name for a receipt)
Section
900-115 (2) states what a information must appear on a receipt
(a) The name or business name of the supplier; and
(b) The amount of the expense
(c) The nature of the goods or services;
(d) The day the expense was incurred;
(e) The day it is made out.
The requirements for a receipt for property which is to be depreciated are much the same, but are set out separately in section 900-120
(1) The material that this division requires you to retain
(2) A summary, that for each expense
Notes the expense
Has a cross-reference to the receipt (written evidence)
Summarise the particulars set out on the receipt
(Converts any foreign currency amounts to Australian dollars)
And if you can not provide the receipts?
Section
900-185 says you can not deduct the expense It also says you have not committed an offence, so the only penalty would be interest on the amount of any tax you have not paid as a result of claiming the deduction without having the written evidence.
Not doing something necessary to follow the rules in this Division does not affect your right to deduct an amount if the only reason was that you had a reasonable expectation that you would not need to do it in order to be able to deduct that amount.
Now the not so good news
the phrase
REASONABLE EXPECTATION will be the sticking point if you ever try to use this 'out'.
And if you have lost or destroyed the receipts?
Section
900-205 (1) will allow you to use a complete copy of the receipt
You will have to
convince the Commissioner you took reasonable precautions to prevent the loss or destruction - section 900-205 (2)
And if you manage to convince the Commissioner you took reasonable precautions?
It all depends on the document.
If it is a
travel record, log book or other document that is NOT written evidence of an expense (in other words NOT a receipt) Refer section 900-205 (3)-
All will be forgiven
- you keep your deduction
But what if it is a receipt?
(written evidence of an expense) Section 900-205 (4) requires you to try to get a substitute document (that meets all the requirements of the original)
If you succeed section
900-205 (5) allows the Commissioner to treat the copy as the original - you get to keep your deduction.
And if you fail to get a copy?
It all depends on
if it was reasonably possible to succeed in getting a substitute.
If it was reasonably possible to get a substitute AND YOU DON'T this section will not protect you from the consequences of failing to retain or produce the original In other words - you don't get the deduction. Refer section 900-205 (7)
Answer this question….
If you have lost your receipts and the Commissioner asks you to produce them to substantiate your claim for a deduction, you will automatically lose the deduction?
If you took reasonable precautions to prevent the loss or destruction of a receipt and it was not reasonably possible to succeed in getting a substitute receipt, you may still be allowed the deduction you have claimed for the expense.
If you want the deduction - keep the receipt
If you want the deduction - keep the receipt!
(a) The nature of the activity;
