Claiming deductions for expenses that relate to your work

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					                                               I N F O R M A T I O N

                                              Claiming deductions for expenses that
                                              relate to your work as an employee
                                              You can claim deductions for work related expenses you incurred while performing your job.
                                              Generally, a work related expense is incurred when you have spent the money or paid by
                                              cheque or credit card. In some cases, you will have incurred a work related expense when
                                              you received a bill or invoice for the expense which you are liable for and must pay. Refer to
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                                              Taxation Ruling TR 97/7—Meaning of incurred for more information about when an expense is
                                              incurred. To find out how to get this ruling, see the inside back cover of TaxPack.
                                              If your work related expense includes an amount of goods and services tax (GST)—the GST is
                                              part of the total expense and is therefore part of any allowable deduction.
                                              Basic rules to consider before you decide to make a claim:
                                              • You must have incurred the expense in 2000–01.
               Note
                                              • You cannot claim an expense which has been or will be reimbursed to you by your employer
              If your income comes from         or any other person.
              carrying on a business, claim   • You must have incurred the expense in the course of earning your assessable income and it
              your business expenses in
              the 2001 business and
                                                must not be private, domestic or capital in nature. For example, the costs of normal travel
              professional items schedule.      to and from work or buying lunch each day are private. If you incurred an expense that was
              See questions 13 and 14           both work related and private or domestic, you can only claim a deduction for the work
              TaxPack 2001 supplement.          related portion of the expense.
                                              • If you incurred an expense for services paid in advance, read Advance expenditure below to
                                                decide whether the whole of the expense is allowable in 2000–01.
                                              • You must be able to substantiate your claims with written evidence if the total claimed is
                                                greater than $300.
                                              • You need to be able to show how you worked out your claims if the total claimed is $300 or
                                                less—you do not need written evidence.
                   Advance expenditure        You must follow the apportionment rules for advance expenditure if it is for a service costing
                                              more than $1000 and the service extends for a period of more than 13 months. Under these
                                              rules you may be entitled to claim only part of the expenditure this year and the rest in future
                                              tax returns. If you need to know more, ring the Personal Tax Infoline on the inside back cover
                                              of TaxPack.
                              Allowances      Receiving an allowance from your employer does not automatically entitle you to a
                                              deduction—you must still meet the basic rules listed above to make a claim.
                                              You can claim only the total amount you incurred even if the allowance is more. For example,
                                              if you received a tools allowance of $500 and your tool expenses were $400, you must include
                                              the whole amount of the allowance at item 2 on your tax return and the deduction you can
                                              claim at item D5 is $400.
                    Claims of more than       If your total claims exceed $300, keep written evidence to prove the total amount, not just the
                     $300—records you         amount over $300. The $300 limit does not include claims for car, meal allowance, award
                           need to keep       transport payments allowance and travel allowance expenses. You must have written evidence
                                              to prove your claims for these expenses. There are some exceptions to the written evidence
                                              rule—explained in the relevant questions.
                        Written evidence      Written evidence can be:
                                              • a document from the supplier of the goods or services, showing:
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                                                – the name of the supplier
                                                – the amount of the expense
                                                – the nature of the goods or services—if not shown, you may write this on the
                                                    document before you lodge your tax return
  2001                                          – the date the expense was incurred
    36                                          – the date of the document.
                                    If the document does not show the payment date, you can use independent evidence to
                                    show the date the expense was incurred, such as a bank statement. A document from
                                    the supplier of the goods or services must be in English unless the expense was incurred
 Don’t leave it too late!           outside Australia.
Will your total claims for work   • your PAYG payment summary—individual non business—for example, it may show your
related expenses exceed             total union fees
$300 next year?                   • evidence you have recorded yourself:
If you are unsure, you may
want to keep written                – for expenses of $10 each or less and the total of these expenses is $200 or less or
evidence for your expenses—         – where you have been unable to obtain written evidence—for example, for toll
you will need it if you want to         or parking fees where you cannot get a receipt.




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claim more than $300.
                                    Your records must show the same details as a document from a supplier as described on
                                    the previous page.
     How long you need to         You must keep your written evidence for 5 years from 31 October or, if you lodge later, for
        keep your records         5 years from the date you lodge your tax return. If at the end of this period you are in a dispute
                                  with the Australian Taxation Office (ATO) that relates to a work expense, you must keep the
                                  relevant records until the dispute is resolved.
                                  For depreciation expenses, you must keep records for the entire period over which you
                                  depreciate an item. You must keep your records for a further 5 years from the date of your last
                                  claim. The 5 years start on 31 October or, if you lodge later, from the date you lodge your tax
                                  return. This period is extended if, when the 5 years end, you are in a dispute with the ATO that
                                  relates to the depreciation claim.

                                  Example—Keeping records
                                  Lizzie buys a computer for $4000 in July 1997. Lizzie uses her computer for work 60 per cent of the time.
                                  She claimed 60 per cent of the depreciation on the cost of her computer over 4 years. Her last claim for
                                  depreciation is in her 2000–01 tax return which she lodges on 15 October 2001.
                                  She must keep her records until 31 October 2006. If at this time she is in a dispute with the ATO that
                                  relates to this claim, she must keep her records until the dispute is resolved.

                                  If you have lost your records, or they have been destroyed, ring the Personal Tax Infoline on
                                  the inside back cover of TaxPack to find out what you can do.
          Why you need to         We will work out your refund or tax debt using the information you provide on your
         keep your records        tax return. We may audit this information at a later date. You need to keep your records to
                                  prove your deduction claims in case you are audited.
    Claims of $300 or less        We may ask you to tell us how you worked out your claim and explain why your claim
                                  is reasonable, based on the requirements of your occupation. You do not need written
                                  evidence—you can make reasonable estimates.


Questions D1 to D5 show            Extra information for some occupations
        you how to claim           The ATO provides special information for 16 occupations:
deductions for expenses            • airline employees                              • journalists
 that relate to your work          • Australian Defence Force members               • nurses
                                   • building workers                               • performing artists
         as an employee.           • cleaners                                       • police officers
                                   • lawyers                                        • real estate employees
                                   • factory workers                                • shop assistants
                                   • hairdressers                                   • teachers
                                   • hospitality industry employees                 • truck drivers


                                  Your employer, trade union or association should have copies of this information. Otherwise,
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                                  see the inside back cover of TaxPack to find out how to get it.
                                  If you would like to know more about keeping records, read Taxpayers’ Charter explanatory
                                  booklet 2—Your honesty and the tax system (NAT 2550—7.1999) and booklet 13—Keeping
                                  records (NAT 2561—7.1999). To find out how to get these publications, see the inside back                    2001
                                  cover of TaxPack.                                                                                            37