Latest News

Hot Issues
spacer
Debate heats up around $10k cash ban bill
spacer
There’s still time to move to Single Touch Payroll (STP)
spacer
Real Time World Population Growth - Wow!!
spacer
ATO audits continue to target Lifestyle assets
spacer
Property deduction errors down to ‘lack of understanding’: ATO
spacer
Data can be great stuff! - Australia
spacer
GST refunds for returned imported goods
spacer
14k employers, $230m in super: Financial Services Minister defends proposed SG amnesty
spacer
Bushfires 2019–20 (ATO)
spacer
Accounting profession responds to bushfire crisis
spacer
Helping your business survive a natural disaster - ATO
spacer
Single Touch Payroll (STP) – now ensure super is paid on time.
spacer
Beware of Australian Taxation Office (ATO) impersonation scams
spacer
Australia by the Numbers
spacer
‘Visible, valued and owned’: ATO outlines super priorities for new year
spacer
Introductory Rates & Interest Free Periods
spacer
Our Advent calendar for 2019
spacer
Tax Office sounds warning on 8 types of super schemes
spacer
Don’t forget sharing economy income
spacer
Impress your friends with your knowledge!!
spacer
Salary sacrificing and the superannuation guarantee
spacer
Why so much super “stuff” this year?
spacer
Reverse Mortgage?
spacer
How the gig economy could create hidden tax issues for contractors and employers
spacer
15,000 tip-offs as ATO black economy hotline rings hot
spacer
What happens when interest rates hit the floor?
spacer
Director Penalty Notices (DPN)
spacer
Synchronised global economic slowdown
Article archive
spacer
Quarter 4 October - December 2019
spacer
Quarter 3 July - September 2019
spacer
Quarter 2 April - June 2019
spacer
Quarter 1 January - March 2019
spacer
Quarter 4 October - December 2018
spacer
Quarter 3 July - September 2018
spacer
Quarter 2 April - June 2018
spacer
Quarter 1 January - March 2018
spacer
Quarter 4 October - December 2017
spacer
Quarter 3 July - September 2017
spacer
Quarter 2 April - June 2017
spacer
Quarter 1 January - March 2017
spacer
Quarter 4 October - December 2016
spacer
Quarter 3 July - September 2016
spacer
Quarter 2 April - June 2016
spacer
Quarter 1 January - March 2016
spacer
Quarter 4 October - December 2015
spacer
Quarter 3 July - September 2015
spacer
Quarter 2 April - June 2015
spacer
Quarter 1 January - March 2015
spacer
Quarter 4 October - December 2014
Quarter 1 of, 2017 archive
spacer
Impending GST changes good news for SMEs
spacer
SMSF related-party borrowing arrangements
spacer
Primary Producer Income Tax Averaging
spacer
Active vs passive assets and the small business CGT concession
spacer
ATO issues further taxpayer alerts on key focus areas
spacer
Borrowed money to pay a business tax debt? Is the interest deductible?
spacer
Online Selling
spacer
The dangers of income splitting
spacer
Clients failing on depreciation front - property investment
spacer
Home office deductions: What substantiation will the ATO accept?
spacer
ATO advises accountants on client data swoop
spacer
ATO issues stern reminder on new backpacker tax
spacer
Debt Recovery
spacer
Government takes next step in tax cheats crackdown
spacer
Car salary packages and the deductibility of after-tax running costs
spacer
Choosing an Executor
spacer
ATO fires warning shots at cash economy exploiters
spacer
Getting a tax valuation from the ATO
spacer
5 tips to get home office deductions right
Home office deductions: What substantiation will the ATO accept?

 

Home office expense claims are subject to the same general substantiation requirements as other deductions – that is, it is a requirement that records should be kept for at least five years.

       

 

But in practice, full compliance with the substantiation rules may be difficult. It may be simple to keep a receipt for a printer purchased for a home business, but not so easy to prove the deductible proportion of a specific utilities bill. So the ATO has provided some administrative guidelines to ease this burden.

Proving business use proportion 

The ATO will generally accept these three methods of calculating the business use proportion for a particular expense (in order of preference):

  1. Explicit evidence of business use – such as an itemised phone bill.
  2. Records of representative periods of use – such as a diary record spanning a four-week period (see below for details).
  3. A “reasonable estimate” – the ATO does not define this term, but the taxpayer must be able to demonstrate that such a component was “reasonably likely” under the circumstances.

More about the four-week representative records 

Claims exceeding $50

The ATO requires a taxpayer to keep records for a four-week representative period in each income year in order to claim a deduction of more than $50. The taxpayer can choose to keep records for longer than four weeks or to base their deduction on itemised bills (see above) for the entire year for a more accurate deduction. 

The four-week record is merely the minimum amount of record-keeping that the ATO will accept. It is not a legal requirement to produce a time-limited representative record like the 12 week log book for car expense deductions. Remember to adjust the deduction for periods of leave taken.

According to an ATO fact sheet, the ATO will look favourably upon evidence that the employer expects the taxpayer to work at home or make work-related calls. But be aware that employer expectation is not a legal requirement. Under legislation and taking into account common law covering work-related expenses, it is enough that the expenditure is incurred in the course of producing assessable income and is not private, domestic or capital in nature.

Claims of $50 or less

Claims of $50 or less are not generally subject to substantiation checks by the ATO (although this is not explicitly stated). This however only affects the substantiation of the amount, and does not change the fact that the amount still has to be deductible under law. 

Therefore it would be prudent for the taxpayer to be able to show that they had a reasonable basis for making the claim (for example, to keep evidence that some work was done at home during the year).

Shared expenses 

According to the ATO, an invoice in the name of one person is acceptable as evidence of incurred expenditure for more than one person. This may be relevant where spouses or rental accommodation housemates each do home-based work, using shared utilities.

 

Tax & Super Australia 
www.taxandsuperaustralia.com.au

© O'Brien and Partners 2011 - All Rights Reserved | 91 Station Street, Malvern VIC 3144 | Tel: 03 9509 3911 | Fax: 03 9509 3922