This information is for registered tax agents about the rules for claiming work-related expenses for employees and the written evidence we may request during a review or audit. It may not cover all written evidence we may request due to the individual circumstances of each case.
See also:
- Deduction questions D1-D10
- For queries about work-related expenses, phone 13 72 86 Fast Key Code 2 1 4.
Rules for claiming work-related expenses
To claim a deduction for a work-related expense for your client:
- they must have spent the money themselves and weren't reimbursed
- the expense must be directly related to earning their income
- they must have a record to prove it.
If there was a private component, your client can only claim a deduction for the work-related portion of the expense.
Your client must have spent the money
Your client must have incurred the expense in the relevant income year (for example, to claim a deduction in their 2019 income tax return, they must have incurred the expense between 1 July 2018 and 30 June 2019).
Deductibility test
You can only claim deductions for work-related expenses where they were incurred by your client in the course of gaining or producing their assessable income, and are not of a capital, private or domestic nature.
For an expense to be deductible, it must be:
- incurred in performing the client’s employment activities – for example, travel, home office and phone expenses
- sufficiently connected to their employment activities – for example, work tools/equipment, eligible clothing and self-education expenses and the connection between the expense and your client's income earning activities must be more than remote or minor, and the incurring of the expense not merely peripheral to the activities.
If there was a private component, you can only claim a deduction for the work-related portion of the expense.
Records
If your client can demonstrate that an expense is deductible, then substantiation rules must be met.
Rules for written evidence to substantiate deductions
Your client must have written evidence to prove their claims if the total claims exceed $300. The records must prove the total amount, not just the amount over $300.
The $300 limit doesn't apply to claims for car expenses, meal allowance, award transport payments allowance, or travel allowance expenses. There are special written evidence rules for substantiating these types of expenses.
Written evidence
The documentation must be in English unless the expense was incurred outside Australia.
The following constitute written evidence.
- A document from the supplier of the goods or services that shows the
- name of the supplier
- amount of the expense
- nature of the goods or services – if not shown, your client may write this on the document before they lodge their tax return
- date the expense was incurred
- date of the document.
- Another document or combination of documents containing the information listed above, examples include
- bank and other financial institution statements
- credit card statements
- BPAY reference numbers (may be called receipt or transaction numbers)
- email receipts
- income statement or PAYG payment summary (may show union fees)
- paper or electronic copies of documents – must be a true and clear reproduction of the original.
- Evidence recorded by the client
- for expenses of $10 each or less, providing the total of these expenses isn't more than $200
- if your client has been unable to obtain written evidence, for example, for toll or parking fees where a receipt cannot be obtained.
Each of these items of evidence must show the same details as a document from a supplier as described at the top of this list.
See also:
- Practice Statement PS LA 2005/7 Substantiating an individual's work-related expenses
- Taxation Ruling TR 97/24 Income tax: relief from the effects of failing to substantiate
Claims of $300 or less
Your client doesn't need written evidence but we may ask your client to tell us how the claim was worked out and explain why the claim is reasonable, based on the requirements of your client's occupation.
Exclusions from record-keeping requirements
Specific exclusions from record-keeping or substantiation requirements are available for certain work expenses. These include the following.
- Total work-related expense claims of $300 or less.
- Laundry ($150 or less).
- Travel expenses that are covered by a travel allowance and are within the reasonable allowance amounts we publish. However, your client may still be required to show the basis for determining the amount of their claim, that the expense was actually incurred, and that it was for work-related purposes (refer to Taxation Ruling TR 2004/6).
- Small expenses ($10 each or less and not more than $200 in total).
How long to keep records
Your client needs to keep written evidence for five years from the due date for lodgment of the tax return in which the deduction is claimed. If the return is lodged after the due date, the five years start from this later date. If your client is in dispute with us over a deduction in a tax return after the five years has ended, the relevant records must be kept until the dispute is resolved.
If your client has claimed a deduction for decline in value, written evidence must be kept for five years from the date of their last claim for decline in value. This period is extended if, when the five years end, they are in a dispute with us that relates to a depreciating asset.
See also:
This is information for registered tax agents about the rules for claiming work-related expenses for employees and the written evidence we may request during a review or audit.