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Follow-up on ATO audit and penalty to my sister in-law
Hi everyone,
As some of you are aware following a previous thread, my sister in-law is an exception to the several cases of seeking to minimise taxes.
The ATO audited her tax returns, refused her claim that she is a living woman claiming her sustenance as other work related expenses and then sent her the templated response that included a penalty.
I want some help and guidance in drafting a response for her defence so it is in writing.
In particular, this is an excerpt of what the ATO sent her:
D5 – Other work-related expenses $24,891
The community expectation is that all Australian Citizens and residents are expected to pay their fair share of tax. The ATO is responsible to for maintaining the continuing health of our tax and super systems and to ensure that everyone pays their fair share of taxes.
The income you earn from your employment is taxable. Your employer is required to withhold amounts from your earnings and pay them to the Commissioner. When you lodge your return and the Commissioner makes an assessment, you are entitled to receive a credit equal to the amounts that were withheld.
You can only claim a deduction for expenses that are directly related to the work that you do. Expenses such as mobile phone, and car expenses are private expenses unless you are required to use those items when you are working. Expenses that relate to everyday life, such as purchasing groceries, and ordinary clothing and laundry expenses are private in nature (you can only claim for clothing and laundry if you are required to wear a uniform with a logo or protective gear).
You can find further information on the ATO website regarding:
• deductions you can claim;
• other work-related deductions.
There is a tax ruling regarding deductions: Income tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997 – TR 2020/1 | Legal database (ato.gov.au)
Refusal to comply with your tax obligations may result in prosecution and the imposition of penalties and interest.
Please refer to the Practice Statement for further information: PS LA 2004/10 | Legal database (ato.gov.au)
Work related expenses
A person can only deduct a work expense under section 8-1 to the extent that it is incurred in gaining or producing assessable income and is not private or domestic in nature. Everyday living expenses are private in nature and are not a deduction. To be claimed as a deduction an expense must be incurred in producing assessable income.
The expenses must be incurred in producing assessable income. Expenses such as:
• purchasing groceries,
• clothing (except for a uniform that has an employer’s logo),
• travelling to work and car expenses, including fuel and maintenance (unless you are travelling on business, required to carry heavy equipment, or use your vehicle for work purposes),
• home insurance (unless you operate a business from your home),
• utilities, home phone and internet (unless you work from home),
• mobile phone (unless you are required to use your phone for work purposes)
• boat/trailer insurance (unless you used your boat/trailer to earn your assessable income, for example, a person who operates a business that operates sightseeing tours by boat),
• loan repayments (interest on loans can be a deduction where a business is conducted from the premises that is the subject of the loan or the loan relates to an income producing asset),
• rent (with some exceptions where a person is required to live away from home) are not be deductible.
Is it valid and legally sufficient to reply by asking whether the ATO agent has chosen to confuse her identity as a living woman vs her legal entity? And we point out my sister in-law never claimed those expenses as a person but those expenses are sustenance used by her as a living woman required to help her conduct the work via the legal entity that gives rise to the income that the ATO is entitled to tax.
Does anyone have a response they have written in the past on such a matter and how it played out after? Would love to get some help on this.
Thank you.
God bless,
Brian
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9 Replies
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Here’s my draft letter responding to the ATO seeking to penalise my sister in-law for claiming her sustenance under Other Work Related Expenses.
Any suggestions and feedback welcome.
Thank you.
God bless,
Brian
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This reply was modified 1 year, 6 months ago by brianchu82.
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I’m just a newbie to this but that letter certainly brought a smile to my face.
Very well done in my humble opinion.
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I am impressed. I have the same situation as your sister in law!
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Oh, what was the outcome?
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I don’t think the ATO is letting go. I am not sure if my sis-in-law is paying the penalty to zero her account.
However, I have drafted a letter for her to try to claim her dwelling cost as a tax deduction instead. It’s been around two months since she sent it. Haven’t heard back from them. From my experience doing this, it took three months to get the refund back. But then I live in a rented dwelling while my sis-in-law lives in a house that is already paid off. Not sure if the ATO will allow the imputed cost of a residence to be refunded back.
God bless,
Brian
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Any update?
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Hi there,
My sis in-law only has a small liability of a few hundred dollars owing because of the penalty that the ATO has imposed on her. I don’t know if she just discharged it and taken the path of least resistance. We have set up an ABN for her this year and kept receipts so hopefully this will give her more leeway to claim work-related expenses.
God bless,
Brian
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This reply was modified 1 year, 6 months ago by
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That is so good, well done!
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Thank you.
Just let you all know that we are merely trying uncharted waters to set up at least a stalemate against the ATO. I doubt the ATO will remit the funds to my sister in-law because of this.
We are building a documentation arsenal so should one day the ATO is defanged of its powers or there are common law courts set up by the people, we can launch the counter assault using what we have set up.
God bless,
Brian
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