A taxpayer employed by an organisation that delivers services to disabled people, has been denied deductions for various work-related and self-education expenses, but the AAT decided to remit the shortfall penalty by 85% (from 50% down to 7.5% of the shortfall) because of tax agent error.

See below for details.

[Tax Month – June 2021]



The taxpayer was a social worker, who was employed as support staff by an organisation that provides services for adults and children with disabilities. In his 2017-18 tax return, which was prepared by his tax agent, the taxpayer claimed work-related deductions (laundry, non-slip shoes, mobile phone charges and hand cream) totalling $670. He also claimed self-education expenses consisting of fees for a child protection course ($9,435), a HELP debt ($4,000), travel expenses from work to Geelong for training ($1,500) and depreciation of a computer ($137). At the time the return was prepared, the taxpayer had not paid the course fees and was not even sure whether he had to (he didn’t).

The ATO disallowed the work-related deductions and the self-education expenses and imposed a 50% shortfall penalty.

The AAT decided that:

  • the course fees were not deductible as the taxpayer had not paid them;
  • the HELP debt was not deductible by virtue of s 26-20 of the ITAA 1997;
  • there was no evidence supporting the travel expenses; and
  • the taxpayer failed to substantiate the various work-related deductions (for example, there were no receipts).

As regards the shortfall penalty, although the AAT was satisfied that reasonable care had not been taken in preparing the 2018 tax return and the “safe harbour” exception did not apply, it was still appropriate to remit the shortfall penalty by 85%. This was largely because the tax agent had made a mistake in claiming the course fees and provided incorrect advice to the taxpayer in relation to the deductibility of HELP loan repayments and the travel expenses.

(Munkayilar v CofT [2021] AATA 1839, AAT, Kirk SM, 22 June 2021.)


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