Deductions disallowed for individual taxpayer

Photographer’s travel expenses not deductible, 05 April 2018
PSJF v FC of T

The AAT has confirmed that certain “work-related expenses” claimed by a taxpayer employed as a photographer were not deductible under s 8-1 of ITAA 1997. The AAT also upheld a 25% shortfall penalty imposed on the taxpayer for failure to take reasonable care in complying with tax obligations.

Following an audit, the Commissioner disallowed a range of deductions claimed for travel and accommodation, as well as for stationery, computer hardware, other gear and equipment and depreciation of such items.
The AAT found the travel expenses were primarily incurred for a family holiday and were therefore exclusively of a private nature. There was no evidence to support the taxpayer’s arguments that the trip had sufficient nexus to his employment or to a business he carried on.

The AAT also agreed with the Commissioner that his discretion to accept bank statements as convincing evidence of deductible expenses such as the hardware or equipment was not to be exercised in this instance. The AAT held the bank statements failed to meet the evidentiary threshold of s 900-115 of ITAA 1997, for which the accepted document was a tax invoice with a receipt for payment. Evidence of a mere transfer of funds was insufficient to support the actual character of an expense. There was also insufficient evidence to support the depreciation claims.

AAT ref: [2018] AATA 678, T Tavoularis, Senior Member, 20 March 2018, Brisbane.

Note: This case is an example of the ATO’s continued focus on incorrect deductions claimed by individual taxpayers for what are perceived to be work-related expenses. It involved an individual who prepared their own tax return with understandably limited knowledge of the specific tax law requirements to obtain a valid tax deduction for expenses incurred. It also highlights the importance of proper documentation and record keeping for claiming such expenses. Incorrect claims that cannot be substantiated with required records lead to having to pay additional tax as well as penalties.

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