ATO issues reminder on record-keeping requirements for taxpayers
The Tax Office has reminded taxpayers to consider what work-related expenses they could claim with appropriate supporting records this financial year.
The most common work deductions the ATO sees each year include working from home and car expenses.
When making deductions, it is important to provide proper receipts and documentation to support the claims.
ATO assistant commissioner Rob Thomson said work-related expenses are a key focus for the ATO.
“Work-related expenses are the largest category of deductions the ATO sees for individuals each year, with more than 8 million claims last year,” he said.
“Keeping good records can reduce the cost of managing your tax affairs and ensures you can claim all expenses that you are entitled to.”
Thomson said at the beginning of each year it is hard to know exactly what can be claimed at tax time, however, it is important to check what work-related expenses can be claimed and what records are needed to prove them.
The ATO said keeping track of records can be the hardest part and it is important to plan to store those records properly for when they are needed.
Keeping good records can reduce the cost of managing tax affairs and ensure all expenses entitled can be claimed. Records can be either paper or digital versions but must be clear and easily distinguishable.
“Remember, regardless of how you keep your records, you need to keep them for five years from the date you lodge your tax return,” Thomson said.
When claiming work-related expenses, there are “three golden rules” to meet to ensure the expense is deductible.
The ATO said for a work-related expense to be deductible, money must have been spent by the taxpayer, the expense must directly relate to earning income and there must be a record or receipt to prove it.
Thomson said a bank statement isn’t considered a “sufficient” level of evidence to claim a deduction for work-related expenses.
“Your deductions may be disallowed if you’re not eligible or don’t keep the rights records,” he said.
“There is a common myth that you can claim $300 for work-related expenses automatically, without proof – but this isn’t true.”
“If your total claim for work-related expenses is less than $300, you may not need receipts but you must be able to show you spent the money and how you have calculated the amount of your claim.”
The ATO said in 2023 over half of individuals who claimed working from home expenses used the fixed rate method.
“With the fixed rate method, you will need a record of the actual number of hours you worked from home for the whole financial year between 1 July – 30 June and at least one record for each of the additional running expenses you incurred that the rate includes,” said the ATO.
To log hours that have been worked a sufficient system needs to be used such as a timesheet, spreadsheet, diary or logbook.
If not using the fixed rate method to calculate deductions, the actual cost method will need to be used. The ATO said to use the actual cost method, “you need to keep records for any additional running expenses you incurred, the depreciating assets you buy and use while working from home and show how you apportion work-related use for your expenses and depreciating assets.”
“You must be able to show the time you worked from home during the year.”
In 2023, more than 3 million taxpayers claimed a deduction for car expenses.
Thomson said if wanting to claim car expenses in 2025, certain criteria must be met.
To claim deductions, the car must be personally owned or leased, the expenses must be work-related trips, the money must have been personally spent and not reimbursed and supporting records must be kept.
It should be noted vehicles with a carrying capacity of one tonne or more that carry nine or more passengers are not included in the definition of a “car” and must be claimed separately.
The logbook method and the cents per kilometre method are the two options that can be used when trying to calculate expenses.
“The logbook method involves keeping a logbook that shows your work-related trips for a continuous period of at least 12 weeks,” the ATO said. “The 12 weeks need to be representative of your travel throughout the year, with each logbook valid for up to five income years.”
A logbook must include the destination and purpose of every journey, odometer readings for the start and end of a journey, and total kilometres travelled during the period.
The logbook must also contain odometer readings for the start and end of the logbook, and readings for the start and end of the income year.
Thomson said the cents per kilometre method can also be used but is limited to claiming a maximum of 5,000 kilometres for each car used for income-producing purposes.
“The cents per kilometre method allows you to claim a set rate per kilometre and is all-inclusive, covering all of your eligible car expenses, including registration, insurance, repairs, maintenance, fuel and decline in value.”
It is crucial to provide records for how work-related kilometres were calculated.
Thomson also said trips can be claimed directly between multiple workplaces or to perform work duties, but trips can’t be claimed between a person’s house and place of work.
The ATO recommends using the myDeductions tool in the ATO app or visiting the ATO’s record-keeping guide.
