Explanatory Memorandum
(Circulated by the authority of the Assistant Treasurer,the Hon. George Gear, M.P.)Chapter 3 - Detailed Discussion of Changes
This chapter discusses the changes proposed by the Bill on a section-by-section basis.
Only those sections which include a substantive change are discussed.
How this Bill is structured
The Bill has only five clauses
The Bill, when enacted, will be known as the Tax Law Improvement (Substantiation) Act 1994.
The new Act will come into operation on the day it receives the Royal Assent.
Clause 3 Amendments of the Income Tax Assessment Act 1936
Schedule 1 to the Bill will insert two new Schedules in the Income Tax Assessment Act. They will contain the main provisions of the new law.
| New Schedule 2A to the Act has rules for calculating how much you can deduct for car expenses. | New Schedule 2B to the Act has rules about how you substantiate certain expenses. |
Schedule 2 to the Bill will:
- •
- make consequential amendments of the Act that are necessary because of the changes in Schedule 1; and
- •
- tell you when the new law will replace the old law.
Clause 4 Amendments of the Income Tax Regulations
Schedule 3 to the Bill will make minor consequential amendments of the Regulations that are necessary because of the changes in Schedule 1.
Clause 5 Amendments of the Fringe Benefits Tax Assessment Act 1986
Schedule 4 to the Bill will make minor consequential amendments of the Act that are necessary because of the changes in Schedule 1.
New rules for calculating car expense deductions
Schedule 2A Calculating car expense deductions
This Schedule tells you how to calculate a deduction for car expenses.
The Bill will separate the car expenses provisions from the substantiation provisions and place each of them in a schedule of their own.
The substantiation provisions of the existing law serve 2 functions:
- •
- first, they tell you the records you need to keep to claim a deduction for your expenses;
- •
- second, for car expenses, they tell you the methods you must use to calculate how much you can claim as a deduction.
Substantiation is really only about the first function. The provisions dealing with car expenses cover matters unrelated to that.
Moreover, if you use the 'cents per kilometre' or '12% of original value' method, no substantiation of car expenses is required.
The differences outlined above made it impractical to rewrite the substantiation provisions as one subject matter. On balance, separating the provisions seemed preferable.
This section tells you to which taxpayers the car expenses Schedule applies.
The section will clarify that partnerships which include natural persons must substantiate car expenses.
Under the existing law, the car expenses provisions specifically apply to taxpayers other than companies and trustees. However, there is some confusion about whether a partnership must substantiate its car expenses, particularly if the partnership includes a company or trustee.
The view of the Commissioner has been that partnerships are subject to the substantiation provisions (including the car expenses provisions). However, if all of the partners were companies, the partnership would not incur private car expenses - and would not be subject to substantiation.
Section 2-1 Choosing among the 4 methods
This section tells you how, and when, you can choose to use one of the methods for calculating car expense deductions.
The section will allow you to change your choice of method at any time.
The existing law, which predates the introduction of the self-assessment system, requires you to make a formal election if you chose not to use the 'log book' method. If the Commissioner disallows any part of a deduction claimed using the 'log book' method, then you will be allowed the highest deduction you could otherwise have claimed using one of the other 3 methods.
To reflect the change to a self-assessment system, the provisions will allow you to change the method of deduction you have used for the income year. This can be done regardless of:
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- whether the Commissioner has disallowed any car expense; and
- •
- the method of deduction used to calculate the car expense.
Division 3 The 'cents per kilometre' method
This Division tells you how to use the 'cents per kilometre' method of calculating car deductions.
The Division will widen access to the 'cents per kilometre' method by removing the requirement that, if you lease a car, you must hold the car under a lease whose term is for at least 12 months.
Under the existing law, the car expenses rules apply only if you own or lease the car.
In order to use:
- •
- the 'cents per kilometre' method;
- •
- the '12% of original value' method; or
- •
- the 'one-third of actual expenses' method;
you must, if you are leasing the car, also hold it under a lease whose term is for at least 12 months. If you don't, you must use the 'log book' method to calculate your deduction for car expenses. The 'log book' method has more onerous record keeping requirements than the other 3 methods.
There is no reason to retain this restriction. It will be removed from all of the methods in which it currently applies. Note, however, that if your expense is incurred on a car which you hire on a short-term lease, then the car expenses cannot be calculated under the car expenses Schedule.
The Bill will widen access to the 'cents per kilometre' method by omitting the requirement that you must have incurred all of the expenses yourself.
The existing law contains an anti-avoidance provision designed to limit the circumstances in which the 'cents per kilometre' method and the '12% of original value' method can be used where two or more people claim deductions for expenses on the same car. However, as drafted, the provision has a potential application in commonly encountered and genuine situations.
It would be extremely difficult to redraft the provision so that it applied only to avoidance arrangements.
The provision has been omitted.
Section 3-2 How to calculate your deduction
This section tells you how to calculate a deduction for car expenses using the 'cents per kilometre' method.
This section will widen access to the 'cents per kilometre' method so that you can use it even if you have travelled more than 5,000 business kilometres. However, you will not be able to claim for more than 5,000 business kilometres of travel.
Under the current law, the 'cents per kilometre' method is available only if you have travelled 5,000 kilometres or less in earning your assessable income. If you use this method you don't have to substantiate your expenses.
The 'cents per kilometre' method is the most frequently used of the 4 car expense deduction methods. It is proposed to extend the method so that it will be available to taxpayers who have travelled more than 5,000 business kilometres but who are prepared only to claim a maximum of 5,000 kilometres. Some taxpayers wish to make a cost benefit decision, claiming a lower deduction as a trade-off for reduced record keeping requirements.
The section will clarify that a taxpayer must determine the number of business kilometres travelled by making a reasonable estimate of them.
When using the 'cents per kilometre' method, you need to know the number of kilometres you travelled in the car in the course of producing your assessable income (known as business kilometres). The existing law does not tell you how to calculate the number of business kilometres you travelled, although the Explanatory Memorandum accompanying the original legislation indicated that a detailed and reasonable estimate was required.
The proposed change will state that a reasonable estimate must be made.
A similar change is proposed in sections 4-3 (which will tell you how to use the '12% of original value' method) and section 5-3 (which will tell you how to use the 'one-third of actual expenses' method).
Division 4 The '12% of original value' method
This Division tells you how to use the '12% of original value' method of calculating car deductions.
The section will widen access to the '12% of original value' method by removing the requirement that, if you lease a car, you must hold it under a lease whose term is for at least 12 months.
The section will widen access to the '12% of original value' method by removing the requirement that you must have incurred all of the expenses yourself.
These changes are explained in the notes on Division 3.
Section 4-2 How to calculate your deduction
This section tells you how to calculate a deduction for car expenses using the '12% of original value' method.
The section will clarify that a taxpayer must determine the number of business kilometres travelled by making a reasonable estimate of them.
These changes are explained in the notes on section 3-2.
Division 5 The 'one-third of actual expenses' method
This Division tells you how to use the 'one-third of actual expenses' method of calculating car deductions.
The section will widen access to the 'one-third of actual expenses' method by removing the requirement that, if you lease a car, you must hold it under a lease whose term is for at least 12 months.
These changes are explained in the notes on Division 3.
Section 5-2 How to calculate your deduction
This section tells you how to calculate a deduction for car expenses using the 'one-third of actual expenses' method.
The section will clarify that you must determine the number of business kilometres travelled by making a reasonable estimate of them.
These changes are explained in the notes on section 3-2.
Division 6 The 'log book' method
This Division tells you how to use the 'log book' method of calculating car deductions.
The Division will reduce the complexity of the 'log book' method by allowing you, in all cases, to base your business use percentage on a reasonable estimate of the number of kilometres the car travelled during the year in the course of producing your assessable income.
Under the existing law, to calculate a deduction for car expenses using the 'log book' method you multiply your car expenses by a percentage which approximates the extent to which the car is used to produce assessable income.
The percentage which must be used varies, depending on a number of circumstances. The rules are so complicated that few taxpayers can follow them.
The proposed new rules are simple, but flexible enough to cater for changing circumstances of use. A key aim has been to isolate a single percentage applicable in all cases rather than, as under the existing law, to identify several from which the taxpayer must make the correct selection.
Under the new rules, the keeping of the log book is still a precondition to using the method. However, as a log book generally only covers a 12 week period, its significance is as a guide for estimating business use over the whole period throughout the income year that you held the car.
The approach proposed by this Bill differs from that contained in the Substantiation - Exposure Draft No. 1 of August 1994. In that draft, the log book percentage was to be used in all cases. However, during consultation it became apparent the approach would cause uncertainty about when to keep a new log book as well as requiring a new log book to be kept more frequently than is necessary.
Section 7-2 Income years for which you need to keep a log book
This section tells you when you need to keep a log book.
The section will omit a number of the situations when you must keep a new log book. It will replace them with a single requirement that you must keep a new log book every five years.
Broadly, the existing law requires you to keep a new log book if:
- •
- a reasonable estimate of the business percentage is 10 percentage points or more lower than the log book percentage; or
- •
- you used a different method for claiming your car deductions in the previous year; or
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- you began to use the car to produce assessable income less than 12 weeks before the end of the previous year; or
- •
- your car expenses claim was reduced by the Commissioner in the previous year.
The new law will replace these requirements with a single requirement that you must keep a new log book every 5 years.
The only other circumstances in which you will need to keep a new log book will be if the Commissioner directs you to or if you increase the number of cars using the 'log book' method. These 2 requirements are in the existing law.
Section 7-3 Choosing the 12 week period for a log book
This section will tell you when a log book period must start (if appropriate) and how long you must keep it.
The Bill will omit the restriction on keeping a log book which overlaps two income years.
Under the existing law a log book period must begin and end in the same income year. However, taxpayers often acquire new business cars at the end of an income year and immediately start to keep a log book that overlaps into the next income year - with the result that they cannot use that log book.
This is an unnecessary restriction and should be removed.
Section 7-4 How to keep a log book
This section tells you the details you need to enter in a log book.
The section will omit the requirements that you:
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- sign every entry in a log book of a business journey;
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- record the name of the driver for each journey;
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- record the name of the person who made the entry; and
- •
- record the day when the entry was made.
These unnecessary requirements will be removed. Similar requirements will be removed from subsection 7-4(4) and from odometer records in section 8-2.
The section will omit the Commissioner's discretion to allow a person to use the log book method without keeping a log book.
In practice, this discretion is rarely, if ever, exercised.
The section will omit a specific anti-avoidance provision applying to taxpayers who re-acquire cars which they had previously owned or leased.
Under the existing law, section 82KTK prevents a taxpayer from relying on log book records kept in an earlier period as the basis for entitlement to car expense deductions where a car previously owned or leased by the taxpayer has been re-acquired.
With the adoption of the new log book rules proposed by this Bill, the provision is no longer necessary.
Section 10-3 Further miscellaneous exceptions
These sections identify the circumstances in which certain cars will be exempt from the requirements of the car expenses Schedule.
The Bill will clarify that expenses for cars that are exempted from the requirements of the car expenses Schedule may still be calculated using one of the 4 methods in the Schedule or, instead, under the normal rules governing deductions.
The existing law is unclear about the consequences of owning or leasing a car that is exempt from the requirements of the car expenses Schedule.
The normal deduction rules governing deductions are sections such as sections 51, 54 etc.
The Bill will extend the exemption of certain commercial vehicles used only in work-related travel, to ignore private travel that is minor, infrequent and irregular.
The existing law exempts car expenses to do with taxis, panel vans, utilities and other commercial vehicles, provided that any private use of the car consists solely of work-related travel. This essentially means travel to and from work.
The benefit of this exemption would be lost in situations of very minor and infrequent use of a motor vehicle for other private purposes. An example would be the occasional use of a vehicle to remove the owner's domestic rubbish.
Section 11-1 Definition of 'car'
This section tells you the meaning of the term 'car' in the car expenses Schedule.
The section will amend the definition of 'car' to exclude a panel van or utility truck designed to carry loads of 1 tonne or more.
A Board of Review decision has the effect of including, in the definition of 'car' in this Schedule, a panel van or utility truck that is designed to carry loads of 1 tonne or more. Vehicles of this kind are more likely to be used primarily for commercial purposes and should not be subject to the provisions of the car expenses Schedule.
The amendment will ensure that, if your expense relates to a panel van or utility truck of this kind:
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- the expense will not be subject to the substantiation rules in new Schedule 2B of the Bill; and
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- you cannot calculate your deduction using a method in this Schedule.
Section 11-4 Definition of 'owning a car'
The section tells you the meaning of the term 'owning a car', when it is used in the car expenses Schedule.
The section will treat you as owning a car if you hire the car under a hire-purchase agreement.
In a recent decision of the Administrative Appeals Tribunal, Case 49/94 ATC 429, (1994) 29 ATR, a person who hired a car under a hire-purchase arrangement was treated as being neither the owner nor the lessee of the car. It had been the Commissioner's practice throughout the Income Tax Assessment Act to treat the hirer under such an agreement as the owner.
New rules for substantiation
Schedule 2B Substantiation rules
Section 1-2 Application
This section tells you to which taxpayers the substantiation rules Schedule applies.
The section will clarify that partnerships which include natural persons must substantiate travel expenses.
This change has been explained in the note to section 1-2 in proposed new Schedule 2A.
Section 2-2 Meaning of 'work expense'
This section tells you the meaning of 'work expenses', which must be substantiated under this Schedule.
The section will omit the requirement to substantiate expenses on a motor vehicle which are not subject to the requirements of Schedule 2A.
Under the existing law, some motor vehicle expenses don't qualify as car expenses (and, consequently, deductions cannot be calculated using one of the 4 statutory methods described in the notes to Schedule 2A of this Memorandum). However, they may fall within the definition of work expenses and must then be substantiated.
These expenses are usually on motor cycles or cars taken on short-term hire.
Some taxpayers may not realise that an expense which falls outside the car expenses schedule may still need to be substantiated. Alternatively, a taxpayer who incorrectly uses the 'cents per kilometre' or '12% of original value' method for what are really work expenses will be under a misapprehension that substantiation is not required. This could lead to the loss of all deductions for the expenses.
In order to avoid this confusion, the Bill will not require expenses on motor vehicles to be substantiated unless they are car expenses covered by Schedule 2A.
The only exceptions to this change will be:
- •
- expenses incurred on motor vehicles used in producing your salary or wages outside Australia; and
- •
- a taxi fare or similar expense.
Section 2-3 Getting written evidence
This section tells you that to deduct a work expense you need to get written evidence and, if your expense is for certain travel, to keep travel records.
The section will remove the requirement that you must keep a travel diary:
- •
- for short-term overseas travel; and
- •
- for all short-term domestic travel covered by a travel allowance.
The change will make the rules about keeping travel records the same for all short-term travel.
Section 2-5 Exception for small total of expenses
This section tells you about an exception to the requirement to substantiate that is available if the work expenses you want to deduct total $300 or less.
The section will effectively widen access to the exception by excluding car expenses from the expenses that must be aggregated to determine if they exceed the $300 limit.
The existing law frees you from the requirement to substantiate if the work expenses, and some car expenses you want to claim don't total more than $300.
The Bill will exclude car expenses from the exception, for 2 reasons:
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- first, taxpayers often cannot take advantage of this exception because their car expenses, when added to their work expenses, take them over the limit. By excluding car expenses, it should allow more taxpayers to take advantage of the $300 limit.
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- second, to remove the inconsistency of the existing law which excludes from the $300 limit car expenses where you use the 'cents per kilometre' method and the '12% of original value' method, but not where you use the 'log book' or 'one-third of actual expenses' method.
Section 2-6 Exception for laundry expenses below a certain limit
This section tells you about an exception to the requirement to substantiate work expenses for certain of your laundry expenses.
The section will allow you to deduct up to $150 of your laundry expenses without getting written evidence of them.
The existing law requires you to substantiate all of your domestic laundry expenses. This means:
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- you must keep receipts for your electricity, water, washing powder and other costs; and
- •
- you must calculate how much each wash costs and how many washes per year involve the washing of deductible clothing.
These requirements are onerous for the 3.5 million taxpayers who claim laundry expenses for deductible clothing. By allowing an exemption for claims of $150 or less, most taxpayers should be freed from the requirement to substantiate laundry expenses.
If you wish to claim more than $150 of laundry expenses, then the full amount of the expenses must be substantiated.
It is important to note that laundry expenses are included in the work expenses that must be taken into account when determining if the exemption for work expense claims of $300 or less applies (see notes to section 2-5). Therefore, if you have $250 of work expenses and $140 of laundry expenses:
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- you must substantiate the $250 of work expenses, because your total work expenses (including laundry expenses) total $390;
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- you do not have to substantiate your laundry expenses, because they total less than $150.
Additionally, the change is not intended to give to all taxpayers a deduction of $150 for laundering their clothes. It applies only to those taxpayers who are entitled to deduct expenses for washing their work clothing.
Section 2-8 Exception for domestic travel allowance expenses
Section 2-9 Exception for overseas travel allowance expenses
Section 2-10 Exception for reasonable overtime meal allowance
These sections set out the circumstances in which you may be exempt from some of the substantiation requirements for expenses covered by a travel or overtime meal allowance.
The section will widen the existing exemptions by removing the conditions that:
- •
- you have not incurred expenses above the amount of your allowance;
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- you have not received an allowance that is more than the Commissioner considers reasonable.
Broadly, under the current law you are exempted from certain substantiation requirements if:
- (a)
- you receive a travel or overtime meal allowance; and
- (b)
- the Commissioner considers the amount of the allowance is reasonable; and
- (c)
- the amounts of the expenses you incur, and claim, do not exceed the amount of the allowance.
If you receive more than a reasonable allowance, or spend more, then you are precluded from relying on the exceptions - even if you limit your claim to the amount of a reasonable allowance. This restriction is unnecessary, provided that you do not claim more than a reasonable amount.
The restriction will be removed.
If you claim more than a reasonable amount, you will need to substantiate all of the expenses.
Division 4 Substantiating business travel expenses
This Division tells you what you need to do to substantiate a business travel expense.
The Division will omit the requirement that travel records (i.e. a travel diary) must be kept for short-term overseas travel.
The Bill will standardise the record keeping requirements for both business and non-business travel by requiring written evidence (e.g. receipts) to be kept for domestic short-term travel.
These changes are designed to standardise the differing requirements for substantiating travel expenses.
Under the existing law, written evidence or a travel diary (or both) may be required, depending on:
- •
- whether you are a wage or salary earner or a business person;
- •
- whether your travel is in Australia or overseas;
- •
- whether you receive a travel allowance;
- •
- the duration of the travel.
Table 1 summarises the rules of the existing law.
| Nature of travel | Salary/wage earner | Business person |
|---|---|---|
| Domestic 1-5 nights | Written evidence | Nothing |
| International 1-5 nights | Written evidence and travel diary | Written evidence and travel diary |
| Domestic 6 nights or more | Written evidence and travel diary | Written evidence and travel diary |
| International 6 nights or more | Written evidence and travel diary | Written evidence and travel diary |
Additionally, you must keep a travel diary if you receive a travel allowance. The differing requirements between domestic and overseas travel have been criticised. The changes will standardise them, as shown in Table 2.
| Nature of travel (domestic and international) | Requirements for all travellers |
|---|---|
| 1-5 nights | Written evidence |
| 6 nights or more | Written evidence and travel diary |
One minor difference remains. If the travel is for less than 1 night, the salary and wage earner must keep written evidence, but the business person need not.
This section tells you when you need to get written evidence of an expense.
The section will extend the time allowed for you to obtain written evidence of an expense.
The existing law requires written evidence to be obtained as soon as possible after the expense has been incurred. In practical terms, it should be enough that you have your evidence at the time that you claim a deduction.
However, there will also be situations (usually towards the end of a financial year) where you have just incurred an expense but haven't received the written evidence. In situations like this, if you have good reason to expect that you will get the written evidence within a reasonable time, you can claim the expense beforehand.
Section 5-4 Written evidence from supplier
Section 5-5 Written evidence of depreciation expense
These sections set out the written evidence you must get from the supplier of property or services.
These sections will relax the rules about the form of the written evidence the supplier must give you.
Under the existing law you need, in most cases, to get your written evidence in the form of a receipt, invoice or similar document. In limited situations, you may obtain the evidence from the supplier in another form. For example, if the supplier doesn't usually provide detailed receipts, the supplier may provide the details required in the form of a written statement.
The limitations on the form of the supplier's documentation are unnecessary and confusing.
Under the new law, provided the documentation contains the details required by the law, it can be in any form.
Section 5-4 will extend the range of written evidence that can be relied on to show when an expense was paid.
Written evidence, under both the existing law and the proposed new law, must specify the date on which an expense was incurred.
Sometimes the only document you receive from a supplier is an invoice - which provides all the required details except when the expense was incurred or paid. There is nothing in the law which allows you to produce other evidence of payment if the supplier does not.
These sections will allow you to rely on a bank statement or other reasonable, independent evidence to show when an expense was paid.
These sections will allow you to annotate a document (e.g. a receipt) from a supplier that does not identify the nature of the property or services supplied.
The existing law requires the supplier to identify the nature of goods or services supplied. If the supplier does not, you can't add the details yourself but must ask the supplier to do so.
This is an unnecessary restriction.
Section 5-6 Evidence of small expenses
Section 5-7 Evidence of expenses considered otherwise too hard to substantiate
These sections tell you when you can use your own records to substantiate an expense rather than getting written evidence from a supplier.
These sections will omit the requirement that you must sign each entry for an expense covered by these sections.
The requirement in the existing law is unnecessary.
Section 5-8 Evidence on a group certificate
This section allows you to use your group certificate as written evidence of the nature and amount of a work expense (if that information is shown on it).
The section will widen the range of written evidence you can rely on to substantiate a work expense.
The change arises from situations where union dues (and similar payments) are paid by a deduction from your salary or wages. If your employer makes a note on your group certificate of the amount deducted, it has been the practice of the Commissioner to accept that as sufficient evidence of the expense.
This practice will now be formalised in the law.
Section 6-2 Recording activities in travel records
This section tells you the details you must record in a travel record.
The section will omit the requirement that you must record the date on which each entry is made
The requirement is unnecessary.
Division 7 Retaining and producing records
This Division tells you how long you need to keep the written evidence and other records required to substantiate expenses.
The Division will adopt a uniform period of five years during which substantiation documents need to be retained.
Under the existing law, documents must be kept for:
- •
- three and a half years, for expenses incurred in earning wages or salary;
- •
- seven years, for other expenses.
This can be contrasted with the five year retention period for business generally.
As a return may be amended by a taxpayer or the Commissioner any time up to four years after the tax is due and payable, adopting a five year standard period is appropriate.
Section 8-1 Commissioner's discretion to review failure to substantiate
This section allows the Commissioner to grant relief from the substantiation requirements in certain circumstances.
The section will widen the circumstances in which the Commissioner can exercise the discretion to grant relief from a failure to substantiate.
The existing law authorises the Commissioner to allow a deduction even though the substantiation rules haven't been followed, if the Commissioner is satisfied:
- •
- that you incurred the expense; and
- •
- that it would be unreasonable to deny you the claim.
The Commissioner must consider the extent to which you attempted to follow the rules and whether any failure to do so was deliberate.
The new law will simply require the Commissioner to be satisfied that the expense was incurred based on the nature and quality of your evidence.
Section 8-2 Reasonable expectation that substantiation would not be required
This section provides relief from the substantiation rules if you had a reasonable expectation that you wouldn't need to substantiate your expenses.
The section will remove the restrictions on when this provision can apply.
The existing law contains a number of restrictions on when the section can apply. For example:
- •
- you must have expected to be covered by the $300 exception in Schedule 2B; and
- •
- the Commissioner must be satisfied that an unforeseen, special circumstance arose to prevent you taking advantage of that exception.
These restrictions are unnecessary.
Consequential amendments
The consequential amendments of the Income Tax Assessment Act and other Commonwealth legislation make the changes necessary to reflect the restructuring, rewriting and renumbering of the substantiation provisions. They do not make substantive changes to the Acts they amend.
The Bill also proposes the repeal of section 223A of the Income Tax Assessment Act. That section imposes additional tax if you overestimate the business use percentage of a motor vehicle for the purposes of the 'log book' method for calculating car expenses deductions.
This section is no longer required. Under the new self-assessment penalty regime introduced by the Taxation Laws Amendment (Self Assessment) Act 1992 , a specific penalty applies if there is a tax shortfall and the shortfall is caused by a failure to take reasonable care, recklessness, or an intentional disregard of the law.
These provisions adequately deal with cases currently covered by section 223A.
Impact of Changes
This table outlines the impact, if any, that the changes in the Bill will have on reported cases on the existing substantiation provisions.
| Case(1) | Subject | Impact |
|---|---|---|
| Case W124 89 ATC 975 AAT Case 7273 (1991) 22 ATR 3037 | Known as `The Evangelist's case'. Keeping documentary evidence of expenses, signing expense diaries and log book records. | The terms of s.82KZAA, inserted after this case, have been altered. The Commissioner need only be satisfied that you incurred an expense and that you are entitled to deduct the amount claimed. Note also, the signing requirements have been reduced. |
| Case Y43 91 ATC 412 AAT Case 7273 (1991) 22 ATR 3402 | No deduction for car expenses of a car provided for exclusive use of an employee - s.51AF | So far as this case considered the meaning of car expenses as defined in subs.82KT(1), it remains relevant to the definition of car expense in s.11-2 of Schedule 2A. |
| Case Z12 92 ATC 163 AAT Case 7784 (1992) 23 ATR 1090 | Overseas travel expenses - lack of documentary evidence. | None |
| Case Z42 92 ATC 381 AAT Case 8419 (1992) 24 ATR 1183 | Journalist - failure to keep diary re travel expenses, standard of documentary evidence for certain employment-related expenses. | None |
| Case 1/93 93 ATC 101 AAT Case 8387 (1993) 24 ATR 1183 | Truck driver - meal and travel expenses limited to an allowance | The changes to the reasonable travel allowance exemption would alter the outcome of a case of this kind. The truck driver will be able to claim up to the amount of the reasonable amount without evidence of the expense. |
| FCT v. Edwards 93 ATC 5162 (1993) 27 ATR 293 | Deductability of certain expenses on purchasing and maintaining conventional clothing. | None |
| Case 49/94 94 ATC 429 to be published in (1994) 29 ATR | Hire purchase of a car was not treated as the owner of the car for the purposes of substantiation | The extended definition of "owning a car" will include hire-purchase. A hire-purchaser will now be able to use the four methods of deducting car expenses. |
| (1) With the exception of FCT v Edwards all of the above cases ar decisions of the AAT. Edward's case was decided by the Federal Court. | ||
Date of effect of the new laws
The benefits of the new law are to be available in the 1994-95 income year.
To achieve this, the new rules will apply to expenses incurred on or after 1 July 1994. The old law will apply only to expenses incurred before that date, but with one exception.
As the new law will be partly backdated, special provisions will apply so that taxpayers are not disadvantaged during the period the law is backdated.
Special transitional provisions - general
If, in the 1994-95 income year, the new law would:
- •
- deny a deduction allowable under the old law; or
- •
- allow a lesser deduction than would be allowable under the old law;
then you can deduct the amount allowable under the old law.
Special transitional provisions - calculating car expense deductions
Log books properly kept under the old law will be treated as kept under the new law. For example, if you kept a log book in 1992-3, then under the new law's 5 year cycle for keeping log books, you shouldn't have to keep a new one until 1997-8.
If you would be required by the new law to keep a new log book in 1994-5 by the 5 year rule, that obligation will be deferred until 1995-6.
However, if you received a notice from the Commissioner under the old law directing you to keep a log book in 1994-5, you will still be required to keep that log book in 1994-5.
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