• Work-related expenses

    This is information for registered tax agents about the rules for claiming work-related expenses and the written evidence we may request during a review or audit.

    This information may not cover all written evidence we may request due to the individual circumstances of each case.

    See also:

    Rules for claiming work-related expenses

    A deduction is allowable if your client can show that an expense:

    • was actually incurred
    • meets the deductibility tests
    • satisfies the substantiation rules.

    Actually incurred

    Your client must have incurred the expense in the relevant income year (for example, to claim a deduction in their 2016 income tax return, they must have incurred the expense between 1 July 2015 and 30 June 2016).

    Deductibility test

    Your client must, in the first instance, be able to show that work-related expenses were incurred in the course of gaining or producing assessable income, and are not losses or outgoings that are of a capital, private or domestic nature.

    For an expense to be allowable as a deduction, your client must be able to show:

    • the essential character of the expense is income-producing
    • there is a link between the outgoing and the assessable income in that the nature of the outgoing is incidental and relevant to the gaining of assessable income
    • there is a necessary connection between the particular outgoing and the operations or activities by which your client more directly gains or produces assessable income.

    Substantiation

    If your client can demonstrate that an expense is allowable, then substantiation rules must be met.

    Rules for written evidence to substantiate deductions

    Your client must have written evidence to prove their claims if the total claims exceed $300. The records must prove the total amount, not just the amount over $300.

    The $300 limit does not apply to claims for car expenses, meal allowance, award transport payments allowance, or travel allowance expenses. There are special written evidence rules for substantiating these types of expenses.

    What is written evidence?

    The documentation must be in English unless the expense was incurred outside Australia.

    The following constitute written evidence.

    • A document from the supplier of the goods or services that shows the
      • name of the supplier
      • amount of the expense
      • nature of the goods or services – if not shown, your client may write this on the document before they lodge their tax return
      • date the expense was incurred
      • date of the document.
       
    • Another document or combination of documents containing the information listed above, examples include
      • bank and other financial institution statements
      • credit card statements
      • BPAY  reference numbers (may be called receipt or transaction numbers)
      • email receipts
      • PAYG payment summary (may show union fees)
      • paper or electronic copies of documents – must be a true and clear reproduction of the original.
       
    • Evidence recorded by the client
      • for expenses of $10 each or less, providing the total of these expenses is not more than $200
      • if your client has been unable to obtain written evidence, for example, for toll or parking fees where a receipt cannot be obtained.
       

    Each of these items of evidence must show the same details as a document from a supplier as described at the top of this list.

    See also:

    • Practice Statement PS LA 2005/7 Substantiation of deductions claimed by individual taxpayers for work and car expenses incurred in the course of earning non-business and non-investment income
    • Taxation Ruling TR 97/24 Income tax relief from the effects of failing to substantiate

    Claims of $300 or less

    Your client does not need written evidence but we may ask your client to tell us how the claim was worked out and explain why the claim is reasonable, based on the requirements of your client's occupation. Your client can make reasonable estimates.

    Exclusions from record-keeping requirements

    Specific exclusions from record-keeping or substantiation requirements are available for certain work expenses. These include the following.

    • Total work-related expense claims of $300 or less.
    • Laundry ($150 or less).
    • Travel expenses that are covered by a travel allowance and are within the reasonable allowance amounts we publish. However, your client may still be required to show the basis for determining the amount of their claim, that the expense was actually incurred, and that it was for work-related purposes (refer to Taxation Ruling TR 2004/6).
    • Award transport payments where the claim is limited to the amount payable under an award as at 29 October 1986. If your client has a claim for any additional kilometres not covered by the award transport payment, car expenses can be claimed but only using either the logbook method (your client will need written evidence) or the cents per kilometre method.
    • Small expenses ($10 each or less and not more than $200 in total).

    How long to keep records

    Your client needs to keep written evidence for five years from the due date for lodgment of the tax return in which the deduction is claimed. If the return is lodged after the due date, the five years start from this later date. If your client is in dispute with us over a deduction in a tax return after the five years has ended, the relevant records must be kept until the dispute is resolved.

    If your client has claimed a deduction for decline in value, written evidence must be kept for five years from the date of their last claim for decline in value. This period is extended if, when the five years end, they are in a dispute with us that relates to a depreciating asset.

    Taxation rulings for specific occupations

    These taxation rulings provide information on tax deductions your clients may be able to claim in specific occupations.

    TR 95/19

    TR 95/19A

    Income tax: airline industry employees – allowances, reimbursements and work-related deductions

    TR 95/17

    TR 95/17A

    TR 95/17A2

    Income tax: employee work-related deductions of employees of the Australian Defence Force

    TR 95/22

    TR 95/22A

    Income tax: employee building workers – allowances, reimbursements, long service payments, redundancy trust payments and work-related deductions

    TR 95/8

    Income tax: employee cleaners – allowances, reimbursements and work-related deductions

    TR 95/12

    Income tax: employee factory workers – allowances, reimbursements and work-related deductions

    TR 95/16

    TR 95/16A

    Income tax: employee hairdressers – allowances, reimbursements and work-related deductions

    TR 95/11

    Income tax: hospitality industry employees – allowances, reimbursements and work-related deductions

    TR 98/14

    Income tax: employee journalists – allowances, reimbursements and work-related deductions

    TR 95/9

    Income tax: employee lawyers – allowances, reimbursements and work-related deductions

    TR 1999/10

    Income tax and fringe benefits tax: Members of Parliament – allowances, reimbursements, donations and gifts, benefits, deductions and recoupments

    TR 95/15

    TP 95/15A

    Income tax: nursing industry employees – allowances, reimbursements and work-related deductions

    TR 95/20

    Income tax: employee performing artists – allowances, reimbursements and work-related deductions

    TR 95/13

    TR 95/13A

    TR 95/13A2

    Income tax: employee police officers – allowances, reimbursements and work-related deductions

    TR 98/6

    Income tax: real estate industry employees – allowances, reimbursements and work-related deductions

    TR 95/10

    TR 95/10A

    Income tax: employee shop assistants – allowances, reimbursements and work-related deductions

    TR 1999/17

    Income tax: sportspeople – receipts and other benefits obtained from involvement in sport

    TR 95/14

    Income tax: employee teachers – allowances, reimbursements and work-related deductions

    TR 95/18

    Income tax: employee truck drivers – allowances, reimbursements and work-related deductions

    See also:

    Last modified: 24 Mar 2016QC 33372