Latest News

Hot Issues
spacer
Employee or independent contractor: What happens when it goes wrong?
spacer
Single Touch Payroll (STP) reporting irregularities: ATO contacting businesses
spacer
Employee entitlements, ‘wage theft’ and Fair Work: Why it’s time to be proactive
spacer
How's Australia really doing - the real figures?
spacer
Pension deeming rates cut from 1 July 2019
spacer
Audit warning sounded as ATO clamps down on dodgy claims
spacer
New ATO data-matching program – overseas movement data and HELP debt
spacer
ATO black economy strike force heads to Brisbane
spacer
Access to more resources and tools than most websites.
spacer
Tax Return Mistakes
spacer
SMSF advice appetite strong, says ASIC
spacer
Taxpayers confused by Scott Morrison’s $1,080 tax refund
spacer
Common STP set-up mistakes - ATO
spacer
Proposal to hold directors liable for GST set to pierce corporate veil
spacer
September 2019 - vital statistics for Australia
spacer
Tax Commissioner wants to turn black economy to ‘lighter shade of grey’
spacer
Changes to the Private Health Insurance Statement
spacer
Up to 9 in 10 ‘other’ expenses adjusted as ATO reveals dodgy claims
spacer
Downsizer Super Contribution
spacer
Tax payers to receive beefed up tax returns.
spacer
10 top global corporations since 1998
spacer
Catch-up Contributions
spacer
Life Insurance
spacer
Community tip-offs trigger ATO visits
spacer
Australia at a glance
spacer
2019: Tax Time Checklists - Individuals; Company; Trust; Partnership; and Super Funds
spacer
Small business clients need to be ready for STP by 30 September
spacer
Big four firm outlines new financial year checklist for SMSFs
spacer
Alert - Online Share Accommodation
spacer
ATO flashes warning over $7.2bn car expenses claims
Article archive
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