Work-related deductions and the substantiation rules
To claim a work-related expense deduction, the taxpayer must keep records that substantiate the claim under Division 900 of the Income Tax Assessment Act 1997. Here's the framework and the $300 threshold.
What the substantiation rules require
Division 900 of the Income Tax Assessment Act 1997 details the requirements for substantiating work-related expense claims. These rules ensure the accuracy and legitimacy of deductions claimed on a tax return.
If the total amount of work-related expenses claimed by a taxpayer for the year exceeds $300, written evidence is generally required to support each individual expense. Acceptable forms of written evidence include receipts and invoices.
Regardless of whether the total claimed expenses are above or below the $300 threshold, taxpayers must maintain a reasonable basis for the amounts they claim as deductions.
What 'written evidence' must show
Written evidence must clearly demonstrate specific details about the expense being claimed. This includes the supplier's name, the amount of the expense, the nature of the goods or services provided, the date the expense was incurred, and the date the document was created. This information is essential for the Australian Taxation Office to verify the legitimacy of the deduction.
Bank or credit-card statements are not typically sufficient as written evidence unless they provide a level of detail that clearly identifies the goods or services purchased. A simple statement showing a transaction amount is not enough; it must demonstrate what was bought and from whom.
All records provided as substantiation must be in English, or accompanied by a capable translation.
Special record-keeping regimes
Certain work-related expenses are subject to specific record-keeping regimes. These regimes provide alternative substantiation requirements to the general rules.
For car expenses, taxpayers can choose between two methods: the cents-per-kilometre method or the logbook method. The cents-per-kilometre method is available for those travelling a limited number of kilometres. The logbook method requires maintaining a 12-week representative period logbook.
Travel expenses incurred when travelling away from home for work also have a specific requirement. A travel diary must be kept for work-related travel of 6 or more consecutive nights, whether the travel is domestic or overseas. Similarly, home office expenses can be claimed using either a fixed-rate method or an actual-costs method, each with its own record-keeping requirements.
How long records must be kept
Records of work-related expenses must be retained for a minimum of 5 years from the date the tax return was lodged. This applies to all forms of records used to substantiate claims.
The retention period extends beyond the initial 5 years if the Australian Taxation Office (ATO) is engaged in a dispute with the taxpayer. In such circumstances, records relating to the disputed expenses must be kept until the dispute is formally resolved.
Electronic records, such as scans, photographs, and receipts stored via apps, are acceptable forms of substantiation. However, these records must satisfy the ATO’s requirements for written evidence and remain accessible throughout the entire retention period.
Frequently asked
Do I need receipts for work-expense claims under $300?
If total claimed work expenses for the year are $300 or less, written evidence is not strictly required for each amount — but the taxpayer must still have a reasonable basis for the amounts claimed. Once total claimed expenses exceed $300, written evidence is required for each amount.
How long must I keep work-expense records?
Generally 5 years from the date the return was lodged. If the ATO is in dispute with the taxpayer at the end of the 5-year period, records must be kept until the dispute is resolved.