Arrowhead Tax Accountants
Certified Practising Accountant

Deduction Guidelines

April 2, 2024

As taxpayers we must always ensure that we have receipts to support our deductions and moreover, retain these for five years in the event of a review.  This requirement is applicable to all taxpayers. 

In Australia, taxpayers are required to provide evidence to support any tax deductions claimed on their tax returns. The Australian Taxation Office (ATO) requires taxpayers to keep records and receipts to substantiate their claims for deductions. These records should demonstrate that the expenses were incurred in the course of earning assessable income. This does not differentiate between business income and salary and wage earners. 

Here are some common types of evidence that may be required to support tax deductions in Australia:

  1. Receipts and Invoices: Receipts and invoices provide proof of payment for expenses claimed as deductions. These documents should include details such as the date of the transaction, the amount paid, the name and ABN (Australian Business Number) of the supplier, and a description of the goods or services purchased.
  2. Bank Statements: Bank statements can be used to support deductions for expenses paid electronically or by cheque. They should clearly show the transactions related to the claimed expenses.
  3. Expense Records: Taxpayers should maintain detailed records of deductible expenses, including any calculations or apportionments made to determine the deductible portion of an expense.
  4. Contracts or Agreements: Contracts or agreements may be required to support deductions for expenses related to business contracts, rental properties, or other contractual arrangements.
  5. Travel Records: For deductions related to travel expenses, taxpayers should keep records such as travel itineraries, boarding passes, accommodation receipts, and receipts for meals and other expenses incurred while traveling for work purposes.
  6. Motor Vehicle Logbooks: Taxpayers claiming deductions for work-related car expenses using the logbook method must keep a logbook to record business-related travel. The logbook should include details of each trip, such as the date, purpose, starting and ending odometer readings, and total kilometres travelled for 13 weeks. 
  7. Documentation for Home Office Expenses: Taxpayers claiming deductions for home office expenses should keep records such as utility bills, mortgage or rent agreements, and receipts for home office equipment and furniture if they intend to claim a proportion of the actual cost.
  8. Professional Advice: In some cases, taxpayers may need to seek professional advice or obtain written opinions to support complex or contentious deductions.

It’s essential for taxpayers to keep accurate and detailed records to substantiate their claims for deductions, as bank statement line items are do not display “sufficient specificity”. Failure to provide adequate evidence to support deductions may result in the ATO disallowing the claims and potentially imposing penalties or interest. 

Disclaimer: The contents of this paper are for general information only. They are not intended as professional advice, for this you should contact a suitably qualified accountant or other professional. The tax law and ATO position on these matters may be subject to both prospective and retrospective changes.

© Arrowhead Accounting Pty Ltd trading as Arrowhead Tax Accountants 2024