The AAT has upheld the Commissioner’s objection decision, which denied a photographer/taxpayer work-related expenses claimed by a photographer on the basis that he failed to discharge his onus of establishing that the claimed amounts were deductible.

The taxpayer claimed travel expenses and other expenses (eg stationary, mobile phone, protective gear, internet, computer hardware, camera, depreciation) totalling almost $37,000, in aggregate across his 2013 and 2014 tax returns. The taxpayer, who represented himself before the Tribunal, claimed that he made a trip to Darwin and another to Thailand, as part his shooting photographs for his employer.

The nature of the expenses could conceivably have been deductible under general tax law (s8-1 of the ITAA97, for instance) but there were also substantiation requirements for work-related expenses, that have to be complied with under Div 900 of the ITAA97. These include a requirement for written evidence of the expense (eg. tax invoice) and also a travel diary when staying away from home for 6 or more nights.

The Commissioner has a discretion to waive compliance with these superadded substantiation expense requirements, when he is satisfied that the taxpayer ‘incurred the expense” and is (otherwise) “entitled to the deduction” (s900-195). The AAT is entitled to exercise the same discretion, if the Commissioner has not, as part of it’s role in reviewing the Commissioner’s objection decision.

The Tribunal, however, refused to exercise this discretion in the taxpayer’s favour, saying that the taxpayer fell “way short” of the evidence that would be required to do this.

  • The Tribunal was of the view that the flight expenses claimed for the taxpayer, his wife and 2 children were primarily incurred for the purposes of a family trip or holiday.
  • It said no business income was returned from the trips and there was no evidence from the taxpayer’s employer that it had asked or directed the taxpayer to incur the cost of making the trips.
  • The taxpayer sought to rely on bank statements re claiming other travel expenses of a hotel and car in Darwin. He said receipts concerning these expenses had been lost in moving from one home to another.
  • The Tribunal found there was no established pattern of behaviour by the taxpayer and little documentary evidence supporting his claim.
  • The taxpayer also sought to rely on bank statements to substantiate the incurring of the other expenses he claimed, and to demonstrate they were deductible.

The Tribunal upheld the Commissioner’s assessments and found no reason to warrant remission of the penalties imposed.

(PSJF and FCT [2018] AATA 678, AAT, Tavoularis SM, AAT File No: 2017/0466-0467, 20 March 2018.)

9.4.18

[FJM; LTN 64, 5/4/18; Tax Month April 2018]

Study questions (answers provided)

  1. Was the photographer taxpayer denied nearly $37,000 of work related expenses?
  2. Was the chief problem with lack of substantiation?
  3. Could the Commissioner/AAT waive compliance with substantiation requirements, if satisfied of the underlying deductibility of the expense?
  4. Did the AAT exercise this power?
  5. Was there any evidence that his employer had requested the photographs or trip?
  6. Did it help that he took his wife and 2 children on the trips?

 

 

[answers:1.yes;2.yes;3.yes;4no;5.no(aBigPartOfTheProblem);6.no]

 

 

 

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