Tax and the Burden of Proof - the Importance of documentation.
Unlike most Western Legal Systems where you are innocent until proven guilty, under Australian Income Tax Law the burden of proof is on the Taxpayer.
A recent AAT (Administrative Appeals Tribunal) case highlights this where a real estate sales person could not validate his expenses through documentation.
The Commisssioner of Taxation requested supporting documents but they were not provided. Some were in fact legitimate deductions but a lack of documentation sort to deny the deductions.
It was restated that the burden of proof is clearly in the Taxpayers hands.
Car expenses and work expenses of $150,000 were disallowed due to limited record keeping and receipts.
It was held that Bank Statements were not sufficient evidence to support donation and gift claims. There were no receipts or tax invoices for any of the claimed donations.
As a side note:
Bucket appeals, if you made one or more donations of $2 or more to bucket collections conducted by an approved organisation for natural disasters such as bushfires, severe storms and flooding, you can claim a tax deduction of up to $10 for the total of those contributions without a receipt. You can make manual records supporting these "Bucket" items but the sum total must be $200 or less for the year.
In simple terms, the case highlights the importance of keeping proper records and receipts when claiming tax deductions. Without these, the Tribunal may deny the deductions, even if the expenses are related to earning income. This case serves as a reminder to clients to keep all relevant documents when claiming tax deductions.
If you haven't picked up the Gotax Deduction Grabber, then maybe it's time to do so. The App includes all you need to record and validate your expenses.
Thanks and happy hunting this Tax Season.