In general, there are three ‘golden rules’ when claiming tax deductions:
- You must have spent the money and not been reimbursed.
- If the expense is for a mix of work related (income producing) and private use, you can only claim the portion that relates to how you earn your income.
- You need to have a record to prove it.
1.0 Record Keeping
101 of working with the ATO is that you can’t claim it if you can’t prove it. If you are audited, the ATO will disallow deductions for unsubstantiated or unreasonable expenses. Even if the expense is below the substantiation threshold of $300 ($150 for laundry), the ATO might ask how you came up with that number. For example, if you claim $300 in work related expenses (that is, make a claim right up to the substantiation threshold), how did you come up with that number and not something else?
In addition to the obvious records of salary, wages, allowances, government payments or pensions and annuities, you need to keep records of:
- Interest or managed funds.
Records of expenses for any deductions claimed including a record of how that expense relates to the way you earn your income. That is, the expense must be related to how you earn your income. For example, if you claim the cost of RAT tests, you need to be able to prove that the RAT test was necessary to enable you to work. If you were working from home and not required to leave home, it will be harder to claim the cost of the test.
- Assets such as shares or units in a trust, rental properties or holiday homes, if you purchased a home or inherited a property, or disposed of an asset (including cryptocurrency).
You need to keep your records for five years. These can be digital copies of the records as long as they are clear and legible copies of the original. If your records are digital, keep a backup.
Records can be tax invoices, receipts, diary entries or something else that proves you incurred the expense and how it related to how you earn your income.
Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
