employee - Aston Accountants

Proper record keeping for tax deductions

If you have ever lodged a tax return, you would know the pain in keeping records to substantiate your tax deductions. While it may be possible that some receipts are lost, perhaps it is a fuel receipt that is lost in the glovebox (or beneath the car seat!), or simply faded over time, it is important that you keep all the receipts as evidence that you have made the purchase as the receipt will include detailed line items of what was purchased.

There is a recent case where the Administrative Appeals Tribunal (AAT) knocked back a taxpayer’s claim for deductions. One of the reasons was that the claims were based on his bank statement transactions rather than on actual receipts/invoices.

PSJF and Commissioner of Taxation (Taxation) [2018] AATA 678 (20 March 2018)

In PSJF and Commissioner of Taxation (Taxation) [2018] AATA 678 (20 March 2018), the taxpayer was employed as a photographer. He claimed some travel expenses as tax deductions in his tax return. The AAT found that some of his deductions are disallowed.

During the Discussion, there were a few issues that were raised. However we would like to bring to your attention on the matters about the tax deductibility of expenses:

For an expense to constitute an allowable deduction in the production of salary or wages income, a two-pronged test must be satisfied: first, that expense must come within the definition of a deduction pursuant to s 8–1 of the ITAA97. Secondly, such claimed deduction must be substantiated with written or receipt-based evidence. There is no other way for any claimed expense to be allowed as a deduction against assessable income.
Put another way, element (1) above must, to quote the requirements of s 8–1 of the ITAA97, “be incurred in gaining or producing [the Applicant’s] assessable income” and cannot be an “outgoing of a domestic or private nature”. Element (2) above requires that the claimed expense must be substantiated by written evidence – most usually in the form of a tax invoice and accompanying receipt – from “a supplier”. That paperwork must identify the supplier and “the nature of the goods or services” provided by the supplier in order to meet the requirements of s 900-115 of the ITAA97.

To put it simply, for an expense to be tax deductible, it needs to satisfy the following:

have a link between the expense and the income that was earned, and
have sufficient evidence to prove the purchase – and the evidence they require is a tax invoice and receipt.

This means that merely having a bank statement showing the transactions is not a valid form of evidence to claim them as your tax deduction.

There are various ways to keep record of your work or business-related receipts. If you would like to hear about our options in keeping proper records of your receipt without having a shoebox, feel free to have a quick chat to us and we can work with you to find you a best solution.

If you are interested, or are unable to sleep at night, check out the full document here.

ATO & Director Penalty Notices

With the recent collapse of some high profile businesses, it is a good time to review the personal obligations that can fall on a company director to pay certain tax debts of the business.

Director Penalty Notices:

When a company fails to pay the superannuation contributions for its employees or the PAYG withheld from its employees’ wages, the ATO can recover those debts from the company directors personally. They do this by issuing a Director Penalty Notice (DPN). A DPN outlines the unpaid amounts and if there are any options to have the penalty remitted.

Directors receiving a DPN have only 21 days to pay the debt or to apply for remission by putting the business into the hands of an Administrator or by commencing to wind up the company.

If the PAYG withholding tax or super contributions have not been reported to the ATO within 3 months of the original due date, then there is no option for remission and the Director must either pay the debt or the ATO will initiate legal proceeding to recover the debt.

Directors take note:

When a business is experiencing financial trouble, it is often seen as a better option to ignore lodging BAS returns as the amount of ATO debt will just become larger. However, by doing this, a Director can put their own personal assets at greater risk if they become no longer eligible for remission by acting to put the business into Administration.

If you feel that this may apply to you or to your business, it is best to seek help before the ATO act. We can assist you with your lodgements to keep you up to date and help you manage your cashflow.

Contact Us

More information can be found on the ATO website

in News / Running A Business / Starting a New Business / Tax Advice and Planning by Melissa de Largie

New Single Touch Payroll – how will it affect you as an employee?

The ATO is implementing the new Single Touch Payroll system so you can have quick access to your employee pay information.

How will it affect me?

Completing TFN Declarations made easier

Employers are required to complete a TFN Declaration for all new employees. Once completed the form should be sent to the ATO within 14 days of the employee’s start date.

The ATO have developed a fillable TFN declaration form which is available at http://www.ato.gov.au/TFNdec

Rather than calling the ATO to order the form and wait for it to be mailed to you, you can now simply download it. Even your new employee can download the form, fill it in on the screen and then send it to you to complete. Once complete, print it out, have it signed, and send the original copy to the ATO using the address on the form.

The TFN Declaration can be filed through Xero without the need to mail it to the ATO, if you are using Xero to run your payroll.

Remember to keep a copy for your files.

Contact us if you need help

in Bookkeeping and Payroll / News / Running A Business by Melissa de Largie

Employee or Contractor – Myths and Facts

The following examines some common misunderstood rules around the employee vs contractor situation.

Myth: I have an ABN so I am a contractor.

You may have an ABN but that does not make you a contractor.

Fact: The ATO has various checks to ensure business owners are treating their staff/contractors correctly.

To put it simply, the ATO will look at the work arrangement and the way the payments were calculated etc to determine whether one is an employee or not.