Personal living expenses

Personal living expenses - examples

The examples below show:

• the type and depth of information we may require when looking at personal living expenses
• how and when to use the worksheets (concise and comprehensive).

Example 1: Concise personal living expenses analysis

Jack is a concreter who runs his own business. He meets with his tax agent to discuss his annual tax returns. Because Jack's business records are not complete his tax agent suggests they quickly look at his personal living expenses using the concise worksheet.

Jack is married and has two school age children. He lives with his wife and children in a home they are paying off. He recently obtained a mortgage to purchase a second home where his parents, who are pensioners, live rent free. He also provides assistance to his brother who lives overseas.

Using both business and personal records Jack completes the concise personal living expenses worksheet with the help of his tax agent (as shown in the sample worksheet 1). Their analysis shows a reported annual household income of $50,829 for both Jack and his wife.

The family's outgoings are $65,900, which exceeds their reported income by $15,071, without taking into account basic household expenses such as food, clothing and entertainment.

As Jack's household outgoings significantly exceed his incoming funds, he will need to look at his records and be prepared to explain the difference.

After explaining the effect of non-cash items in his tax return such as depreciation, his tax agent recommends Jack review his invoices and business expenses to ensure nothing has been missed. He also offers Jack help with his record-keeping practices for his business.

Sample worksheet 1: Personal living expenses concise worksheet

Annual household incoming funds from all sources
Taxpayer's income	After tax	32,200
Spouse's income	After tax	5,750
Family Tax Benefit Part A		10,449
Family Tax Benefit Part B		2,430
Total annual household funds available		$50,829

The figures below have not already been accounted for in the tax returns.

Significant household outgoings
Housing	Mortgage	14,400
Motor vehicle	Fuel, registration, insurance and maintenance	4,500
Health care	Health insurance	2,860
Super	Spouse	3,000
Loan repayments	Credit card repayments	2,400
Other significant outgoings	Mortgage on second property	21,250
	Money transferred overseas	9,990
Schooling	Private school fees	7,500
Total significant annual household outgoings		$65,900
Difference	(Total annual household funds available - total significant annual household outgoings) = difference	-($15,071)

Example 2: Comprehensive personal living expenses

Gertrude, who owns a small painting business, visits her tax agent to discuss her annual tax returns. Gertrude has recently purchased a boat and is concerned about being selected for audit as a result of our data-matching program.

Gertrude's tax agent advises her that her reported income is low when compared to other similar painting businesses and suggests she complete a comprehensive worksheet about her family, their income, assets and expenses.

Gertrude lives with her husband, who does not work, in a home they paid off 10 years ago. They have three children - aged 16, 20 and 24 years old. The youngest lives at home; while the eldest lives in a property his parents purchased with an interest only mortgage.

Using both business and personal records, including bank and credit card statements, Gertrude completes the personal living expenses comprehensive worksheet and records a household income of $36,275 for the year. The family's expenses are $81,275, which exceeds their reported income by $45,000, as shown in sample worksheet 2.

As Gertrude's household outgoings exceed incoming funds, she needs to look at her records and be prepared to explain the difference. Her tax agent calculates that some of the difference is due to non-cash items in the painter's tax return such as depreciation. However, a significant difference still needs to be explained.

If Gertrude was asked to complete a personal living expenses questionnaire during an audit, we would question her about the accuracy of her reported income and household expenses, as $600 for clothing and footwear for a household of two adults and a teenager is low.

If Gertrude was audited, she would be required to produce detailed documentary evidence in support of her explanation. If she was unable to fully explain the difference and unable to produce suitable supporting evidence, we would re-assess her income to a higher figure. She would have to pay tax on any shortfall of omitted income plus penalties and interest.

Sample worksheet 2: Personal living expenses comprehensive worksheet

Annual household incoming funds from all sources
Taxpayer's income	After tax	27,800
Family Tax Benefit Part A		5,800
Family Tax Benefit Part B		2,675
Total annual household funds available		$36,275

The figures below have not already been accounted for in the tax returns.

All annual household outgoings
Housing		Furniture and equipment, rates	1,800
Food and groceries		Groceries, meat, fruit and vegetables, pet food	9,600
		Tobacco and alcohol	1,200
Utilities		Heating, power, water and sewerage	2,475
Services		Phone, gardening and security	1,800
Entertainment and recreation		Eating out, takeaways, lunches and coffees	1,920
		Newspapers, magazine subscriptions, sporting equipment	1,800
		Sporting fees	360
		Lottery tickets	240
Clothing		Clothing and footwear	600
Grooming		Personal care	960
Motor vehicles		Fuel, registration, insurance and maintenance	4,800
Health care		Health insurance	2,160
Super			2,000
Loan repayments		Boat	8,400
		Mortgage on second property	28,800
Holidays		Family trip overseas	5,400
Significant purchases			nil
Schooling		Private school fees and childcare	6,960
Other household expenses		Money transferred overseas, support of relatives	nil
Total annual household outgoings			$81,275
Difference	(Total annual household funds available - total annual household outgoings) = difference		-$45,000

Sections within Personal living expenses worksheets

• Concise personal living expenses worksheet
• Comprehensive personal living expenses worksheet
• Personal living expenses - examples