Tax Deductions and Substantiations – What you need to know
Tax Deductions and Substantiation – What you need to know!
It is common knowledge that Tax Deductions reduce a persons or entities tax liability.
However there can be confusion as to what records or proof the ATO requires be held before the claims can be made.
Substantiation in the form of written evidence, such as a receipt, log book or diary record covers most deductions. Others can be claimed based on ATO reasonable amounts and some require no substantiation at all (provided they are reasonable).
Keeping a receipt for a work related purchase is relatively easy, however difficulties arise for instance when a taxpayer has returned from an overseas work trip and has not kept a travel diary or record of expenses or when a taxpayer intends to claim motor vehicle deductions under the log book method but no complying log is held.
Penalties for disregarding the tax laws are substantial.