Substantiating work related deductions
The ATO has strict rules requiring you to substantiate work-related deductions. Generally you must have written evidence to prove your claims if the total claims exceed $300. The records must prove the total amount, not just the amount over $300. The documentation must be in English unless the expense was incurred outside Australia. It could be a document from the supplier of the goods or services, a tax invoice, or a receipt.
Whether you use a manual or a computerised accounting system, you may want to store and keep paper records electronically. Advances in technology, such as the internet, have meant that many business transactions are processed and kept electronically rather than through a paper-based system, including encrypted records. These records must be in a form that the ATO can access and understand.
Where paper records are produced or received in the course of carrying on a business you may scan the paper records onto an electronic storage medium, provided the electronic copies are a true and clear reproduction of the original paper records.
Where paper records are scanned and stored electronically, record keeping requirements are satisfied if the electronic records are:
o not altered or manipulated once stored;
o retained for the statutory period of five years (for companies or if you have employees – the records must be keep for seven years); and
o capable of being retrieved and read at all times by tax officers.
Paper records that can be scanned and stored include:
o invoices, purchase orders, receipts, vouchers, credit notes, delivery dockets and other such records;
o bank statements and other bank records and documents; and
o any other paper source documents produced or received in the course of carrying on a business.
You don’t have to keep original paper records once they have been scanned onto an electronic storage medium unless a particular law or regulation requires you to retain the paper copies.
Finally, an electronic record keeping system must have adequate controls to safeguard the security and integrity of the records created, processed and kept in the record keeping system.
The accountants at The Quinn Group have years of experience preparing and lodging income tax returns to ensure our clients receive the maximum benefit. Call us today on 02 9223 9166 or submit an online enquiry to find out how we can help you.