When claiming tax deductions, proper documentation is crucial. While bank statements can provide a record of transactions, they often do not include the detailed information required by the Australian Taxation Office (ATO) to substantiate your claims under section 900-115 of the Income Tax Assessment Act 1997.
To meet the substantiation requirements, you must obtain documents from the supplier that cover the following information:
- The name or business name of the supplier.
- The amount of the expense, expressed in the currency in which it was incurred.
- The nature of the goods or services.
- The day the expense was incurred.
- The day the document is made out.
The document must be in English. However, if the expense was incurred in a country outside Australia, the document can be in the language of that country.
According to the case of Copley and Commissioner of Taxation [2024] AATA 8 (Copley), the Tribunal considered the substantiation requirements under section 900-115 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and the sufficiency of bank account statements in proving allowable deductions.
In this case, the Commissioner of Taxation issued amended assessments disallowing deductions claimed by the taxpayer under section 8-1 of the ITAA 1997.
The central issues before the Tribunal were whether the:
- expenses were incurred in gaining or producing the taxpayer’s assessable income;
- expenses were of a private or domestic nature; and
- taxpayer could substantiate the expenses pursuant to the record keeping requirements in Division 28 and Division 900 of the ITAA 1997.
Senior Member Dr. M Evans-Bonner held that the taxpayer did not satisfy the burden of proving that the amended assessments were excessive or incorrect. The decision was based on the fact that the taxpayer failed to meet the substantiation requirements outlined in subsection 900-115(2) of the ITAA 1997, which stipulate the need for specific records such as receipts and invoices to support the expenses claimed.
The Tribunal concluded that bank account transaction statements are insufficient for substantiation purposes as they do not comply with the requirements set out in subsection 900-115(2) of the ITAA 1997. The Copley case underscores the importance of keeping detailed records, such as receipts and invoices, to substantiate expenses claimed as tax deductions.
If you need further assistance understanding substantiation requirements or any other tax-related matters, feel free to contact an Investax Group Tax Specialist for expert guidance and support.
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