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  • The SAACS Team

Back To Basic Series - What do I need to keep for tax deductions?

Updated: Aug 23, 2022



Tax Season is finally here peeps! Before you all come rushing for your tax refunds, it is a good idea to sit back and go through your tax documents and make sure they are up for the test. In the most recent audit cases, we have seen the ATO placing close and strict scrutiny on tax receipts and if they are not complying to the substantiation requirement, the expense claims are likely to be denied.


Any individual receiving salary/wage income can claim a maximum of $300 in reasonable deductions for the year without having to substantiate it. However, the moment your deductions total over $300 you’ll be required to back up every single claim. So, how do you cover yourself?


We have put together a quick guide to make sure you are claiming your full entitlement and how to substantiate it if the ATO come knocking.


The basic rules in simple terms are:

  • The money was spent by you and was not reimbursed (unless you received a specific allowance for you to spend)

  • The expense must directly relate to your work

  • You must have a record to prove it.


RECEIPTS, RECEIPTS, RECEIPTS

This doesn’t mean a shoebox full of scrunched up and faded merchant copies…we honestly couldn’t think of anything worse. Instead, get with the times and go electronic (For Example MyDeduction App)!


The ATO will accept digital receipts as proof so long as they are readable, an original copy and have all the required information. During the year it’s as easy as spend, snap a photo of your invoice, and save! Store any images of receipts in a folder ready for tax time and remember to back up whatever device you’re using so that you can hold onto the evidence for the required 5 years.


Here’s what our dream receipt consists of (actually, ATO says it must show):

  • Name or business name of supplier

  • Amount of the expense – written in the currency in which it was incurred.

  • Nature of the goods/services

  • Day the expense was incurred

  • Day it is made out


Some common deductions to keep records of during the year include:

  • Work equipment and computer consumables invoices

  • Uniform or protective clothing

  • Motor vehicle expenses – receipts and log book ( SAACS Template)

  • Mobile phone & internet – a percentage of your bill can be claimed as work use.

  • Donations – anything over $2 has the potential to be deductible.

  • A 4-week diary of work hours to show your usual pattern of WFH. (SAACS Template)


Is there a case that I don’t need a receipt?

Yes, but under very limited occasions and we list two examples below. The take away point is that although for some cases the you are not required to keep all receipts, you still need to exercise caution in working out your deductions.


For small and hard to get receipts where you spend $10 or less and the total small expense claim is under $200 – you can use bank statements, or written record in your work diary.


For overtime meal expense receipts if you receive an overtime meal allowance under an industry award/law – you don’t need to keep all receipts as long as you are not claiming more than the reasonable amount ATO sets. But you still need to be able to show how you work out the claim amounts.


Common Not-To-Dos?

  • Claiming $150 laundry expense while you do not have a compulsory uniform – this is not an automatic deduction.

  • Claiming 5,000 business km car expenses using Cents Per Kilometre method without a diary of work related trips.


RENTAL PROPERTIES

If you have any investment properties, be mindful that the more details we have the better. Often people may provide a figure for expenditure related to the property for the year but no detail as to what it was for exactly. To keep things simple, try and remember to hold onto the following:


Rental income statements

  • Invoices for any expenses related to the property – especially those for any repairs or maintenance.

  • Invoices for any capital purchases so that we can depreciate them over time.


SOLE TRADERS

When you’re running a business, the best way to keep track of all your ins and outs is by using a software package like our trusty favourite – Xero! Seriously…save yourself the time and hassle of having to create your own business summary. In saying that though, if you happen to be a wizard with spreadsheets, go for it! There’s nothing quite like receiving a beautifully detailed business spreadsheet from a client which has perfectly categorised expenses.

So, maybe organisation or spreadsheets aren’t your forte – don’t stress! There are tools available which can make record keeping a breeze.


ATO APP & MYDEDUCTIONS

For those without an accounting software package, you may find your answer to record keeping within the app store. The ATO has developed their very own app (available on both Apple and Android platforms) which has an inbuilt tool called ‘myDeductions’. This helps individuals keep track of, you guessed it - their deductions! It also has the bonus of being able to record income for sole traders so you can throw those old school spreadsheets out the window.


This tool is great for people on the go, includes handy functions for tracking travel and even stores photos of your receipts to support your claims. Come tax time, the data can be directly shared via email from the app so your accountant receives all the information and supporting documents at once!


One thing to remember if using the app – you MUST remember to backup regularly to the cloud (for Apple users) or to Google Drive (for Android users) as the data is only stored on your device.


Ideally, if you stay up to date on all the little things when tax time comes by you (and us) would be easing through the tax return like with the confidence of a king/queen!


Lastly, we do want to put out a disclaimer that record keeping requirements can be a lot more complicated depending on the type of expense claims, and what we covered above is only the general principle to follow. If you need more clarification as to what you should be keeping or the best way to keep your records in check? Please contact our office and a friendly staff would be able to assist.

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