Claiming tax deductions without receipts is a risky move. As the ATO has gotten more efficient data matching software to track any movements. And so it is harder for the ATO to enforce stricter guidelines. However, in some cases, it is ATO to claim tax deductions without receipts. Let us delve a little deeper into the subject of what can you claim on tax without receipts and try to avoid the ATO’s troubles.
Tax deductions are the primary way in which you can improve your tax position. After all, the role of a tax deduction is to reduce your taxable income. The lower taxable income you have, the lower tax you will pay at the end of the Financial Year. Along with that, deductions add a degree of fairness to the whole tax system; if you have spent money out of your own pocket which had a correlation with how you earn a living. Then it seems fair that you should get something back for that.
To make it clear, the ATO prefers that you hold a receipt for every expense that you have purchased. And want to claim as a deduction on your tax return. But we are all human and sometimes we tend to forget things, including keeping a tidy track of receipts we have purchased throughout the year. So, what happens if you do not have the receipt? What if you lost it? What if it is so faded that you possibly cannot read it?
It is still possible to claim these expenses, even without a receipt!!
There are serious restrictions on claiming a tax deduction without a receipt, however, it is still possible to do so.
Firstly, the expense must be an allowable deduction. What does this mean? This means that you should be able to confidently answer yes to the following three questions:
- Is this expense directly related to and required for you make a living?
- You have paid for this expense out of your own pocket?
- You were not reimbursed or paid back this expense by your employer or client?
If you can say yes to the above three questions, and you paid for the expenses using your credit card or debit card which shows the transactions for the item or items you have purchased, then the ATO can sometimes accept the deduction. As always, you should try to not get yourself into that situation, because we have seen cases where on audit, the ATO has not allowed this to suffice and the client had to pay extra money to the ATO.
What tends to happen in some cases is that a taxpayer has purchased some personal items and some work-related items in the same transaction, which makes audit a difficult task for the ATO if going by the bank statement purely. There needs to be a way to distinguish between the work expenses and the personal expenses, so it is often wise to pay for work related items and personal items separately in two different transactions.
Common Items That You Might Be Able to Claim Without A Receipt
1. Membership Fees or Union Fees
If these costs have been deducted from your employer, to begin with, these will be reflected on their Single Touch Payroll report when they send it to the ATO at the end of the year. This will be available on your MyGov account, or available to us on our prefill report when we lodge your tax return.
2. Fuel with a logbook
If you keep a proper logbook for a minimum of 12 consecutive weeks, then it is possible to use the work-related kilometers you have traveled along with the fuel capacity of your car and the average fuel rate throughout the year to include a fuel deduction in your tax return. We can happily work this out for you.
3. Fuel without a logbook
The easiest deduction to record without receipts. The ATO will allow a claim of 68 cents per kilometer, up to a maximum of 5,000km. However, this must be reasonable with however many kilometers you have traveled for work-related purposes – not including kilometers traveled between home and work.
4. Computer Items
Generally, you are not going to pay for computer items with cash. This will be paid on a credit or debit card, so when you purchase the laptop, make a note on your bank statement at the time of purchase as it will be easier to locate and then use as evidence as proof of purchase. It will also help if you take a picture of the packaging of the computer as that will have the price.
Again, as we move into a cashless society, the use of bank statements as proof of purchase is going to increase, so it would be wise to note the date and time of purchase against the transaction in the bank statement, as well as taking a photo of the items.
Excuses the ATO Will Not Accept as Proof for Deductions
It is important to note that there are some forms of evidence that the ATO will never accept when you try and claim a tax deduction without a corresponding receipt. These include:
- Paying for something using cash. This is not a reason for not having a receipt as far as the ATO is concerned. The ATO will straight away disallow your deductions. For sole traders, paying your employees or contractors in cash is ILLEGAL regardless.
- Having an item with the price tag still on it, but no proof of purchase. In this case, the ATO does not know WHO purchased the item, so it could be your brothers’ item which you are borrowing/using, which you did not actually pay for. This will not suffice to the ATO, so it is important to keep proof of purchase.
- A catalogue or advertisement with the price of the item listed, but no physical evidence as proof of purchase. Once again, the ATO requires the purchase as anyone could have bought that item.
How Much Can I Claim Without Receipts?
The ATO generally says that if you have no receipts at all, but you did purchase work related items, then you can claim them up to a maximum value of $300. However, even if you claimed less than $300 you should be ready to explain what it was, how you paid for it and how it is related to you earning an income.
It is easy and important to keep receipts throughout the year, so you never miss out on your entitlements come tax time. A simple way of keeping track of your receipts is to file any work-related expense receipts in a folder and hand it to us to go through at tax time. That way, we can help you deduce what is an allowable deduction and what is not, along with making sure you maximise your refund and are given the deductions you are entitled to.
If you are in any doubt as to a receipt keeping method, please get in touch with the tax experts at R T Accounting & Taxation Services, and we will do our best to help you maximise your refund.