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  • D10 Cost of managing tax affairs 2021

    This question is about:

    • expenses you incurred in managing your tax affairs, including fees paid to a recognised tax adviser for doing your tax return
    • costs of applications made to the Administrative Appeals Tribunal or appeals to the courts about your tax affairs (litigation costs)
    • an interest charge we imposed on you
    • amounts we charged you for underestimating a varied goods and services tax (GST) instalment or pay as you go (PAYG) instalment
    • expenses for complying with your legal obligations relating to another person's tax affairs.

    You incurred an expense in 2020–21 when:

    • you received a bill or invoice for an expense that you were liable for and had to pay (even if you paid it after 30 June 2021)
    • you did not receive a bill or invoice but you were charged and you paid for the expense.

    Did you incur any expenses in managing your tax affairs?

    No

    Go to Deductions that you show on the supplementary section of the tax return 2021 or return to main menu Individual tax return instructions 2021.

    Yes

    Read on.

    Answering this question

    You can claim a deduction for an interest charge that we imposed on you for:

    • the late payment of taxes and penalties
    • the amount of any increase in your tax liability as a result of an amendment to your assessment
    • the amount of any increase in other tax liabilities, such as GST or PAYG amounts.

    You can claim amounts that we imposed on you for underestimating a varied GST or PAYG instalment.

    You deduct the expense from your 2020–21 income for an interest charge you incurred in 2020–21.

    You cannot claim tax shortfall and other penalties for failing to meet your obligations.

    You cannot claim for judgment debt interest that you had to pay as a result of a court case involving your tax affairs.

    You can claim a deduction for the litigation costs you incurred in managing your tax affairs. Litigation costs include:

    • court fees
    • Administrative Appeals Tribunal fees
    • solicitor, barrister and other legal costs.

    You can claim a deduction for other expenses incurred in managing your tax affairs, such as:

    • the preparation and lodgment of your tax return and activity statements
    • travel to obtain tax advice from a recognised tax adviser
    • obtaining a valuation needed for a deductible donation of property or for a deduction for entering into a conservation covenant; for more information, see Gifts of property in Special circumstances and glossary 2021.

    Expenses for the preparation and lodgment of your tax return and activity statements include costs associated with:

    • buying tax reference material
    • tax return preparation courses
    • lodging your tax return through a registered tax agent
    • obtaining tax advice from a recognised tax adviser
    • dealing with us about your tax affairs
    • purchasing software to allow the completion and lodgment of your tax return. You must apportion the cost of the software if you also used it for other purposes.

    Fees paid to a recognised tax adviser are deductible in the year you incurred them. A recognised tax adviser is a registered tax agent, barrister or solicitor. You can see a list of registered tax agents at Tax Practitioners BoardExternal Link or call 1300 362 829.

    You cannot claim for the cost of tax advice given by a person who is not a recognised tax adviser.

    You can also claim any costs you incurred in complying with your legal obligations relating to another person's tax affairs. This includes:

    • complying with the PAYG withholding obligations, for example, where you withheld tax from a payment to a supplier because the supplier did not quote an Australian business number
    • providing information that we requested about another taxpayer.

    Completing your tax return

    Step 1

    Separate the costs of managing your tax affairs into the following three components:

    • interest charged by the ATO
    • litigation costs
    • other expenses incurred in managing your tax affairs.

    Step 2

    Add up the costs for each component.

    Step 3

    Write the total cost for each component at D10 as follows:

    • interest charged by the ATO at N
    • litigation costs at L
    • other expenses incurred in managing your tax affairs at M.

    Where to go next

      Last modified: 27 May 2021QC 64732