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January 12, 2024

No deduction for work related expenses – insufficient records
The AAT has ruled that a taxpayer, a real estate salesperson, did not meet the burden of proving that amended assessments issued to him in respect of disallowed work related car expenses and other work related expenses of over $150,000 were excessive. In doing so, the AAT found that he failed to meet the substantiation requirement as he did not keep adequate receipts and records to support the expenses that he claimed and appropriate records of apportionment between personal and business usage. In particular, the AAT found that in the absence of corroborating evidence supporting the expenses claimed, such as tax invoices which met the requirements of s 900.115 of the ITAA 1997, the evidence of a taxpayer that he incurred the expenses “was unlikely to be sufficient to meet the burden” of proof. (Copley and FCT [2024] AATA 8, 8 January 2024.)

  1. The issue I must determine is whether the expenses claimed by Mr Copley that are in dispute (for D1, D5 and for gifts and donations) are deductible under s 8-1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997).
  2. This involves a consideration of whether:
    • The expenses claimed were incurred in gaining or producing Mr Copley’s assessable income (as required by s 8-1(1) of the ITAA 1997).
    • The expenses claimed were of a capital, private or domestic nature (if so, no deduction is allowable pursuant to s 8-1(2) of the ITAA 1997).
    • Mr Copley can substantiate the expenses pursuant to the record keeping requirements in Division 28 and Division 900 of the ITAA 1997.
  3. In this application, these considerations are somewhat interlinked. Specifically, Mr Copley was not able to substantiate many of the expenses and consequently it was difficult for me to assess whether they were incurred in gaining or producing his assessable income and whether some of the expenses were of a private or domestic nature (and if they were both how they should be apportioned). Indeed, some of the evidence (such as credit card statements showing purchases that were personal in nature) suggested that some of the expenses fell into that category.
  4. This meant that Mr Copley fell short of meeting the burden under s 14ZZK of the Taxation Administration Act 1953 (Cth) (TAA) which requires him to establish that the Amended Assessments were excessive or otherwise incorrect and what they should have been.


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