In the past few years, we are seeing increasing number of clients acquiring business- or work-related assets on Gumtree or similar community exchange sites. This has raised the concern over the deductibility of such an expense. A recent case before the Administrative Appeals Tribunal (AAT) involving the Gumtree website does shed some light on what we should be paying attention to and what records we need to keep to be able to substantiate the deduction.
A brief on the case
The taxpayer, an engineer attempted to claim a tax deduction on an aircraft maintenance tool set purchased on Gumtree for $25,000. However, he only had an “invoice” with a hand written description and contact details of the seller. The engineer purchased the tool set with cash that was claimed to be earned from gambling.
The seller’s contact details were found to be false and the taxpayer failed to prove the gambling winnings nor the existence of the tools apart from the handwritten description.
The AAT disallowed the taxpayer’s claim for the tool set as a tax deduction.
Take-away from the case – what can we do?
The lesson from this case is not the deductibility of work-related expenses, but to be able to substantiate such transactions. Buying items on Gumtree or Facebook buy-swap groups is different from other online shopping sites. It is likely that there won’t be an invoice prepared accordingly by the seller. In order to make a valid claim, you need to make sure you have adequate documentation to prove the transactions.
You must obtain a document from the seller with:
- Name of the supplier
- Amount of the expense
- Nature of the goods or services
- Day the expenses was incurred
- Date the document is created
It may not always be easy to obtain such a document from the seller; however, you can also draw up the document and ask the seller to sign it.
Alternatively, we can substantiate such purchases with other reasonable independent evidence. For example; a bank statement or credit card statement showing the amount of purchase, photographs or photocopies of a product or service offered at a particular price. It’s also a good idea to combine all the evidence to create a strong case for your claim.
Another option may be to ask the seller to sign a statement by supplier not quoting an ABN form from the ATO: https://www.ato.gov.au/forms/statement-by-a-supplier-not-quoting-an-abn/
Any expenses for your business or personal tax return always have to be substantiated. When using these website just be sure you get the extra information you may need to substantiate the purchase. Happy shopping!