ATO disallowed your tax deductions? Here is what to check

Have you ever claimed a deduction only to have the ATO reduce it or remove it completely? That does not necessarily mean the expense never happened. The issue may be whether you can show why it was deductible.

When reviewing a deduction, the ATO may ask: Did you incur the expense? Was it related to earning your income? Was any part private? Do you have records to support it? Depending on the deduction, specific substantiation rules may also apply. A receipt alone does not automatically make an expense tax deductible. You may still need to establish the connection between the expense and your income.

If an expense was partly private and partly work related, you may need to separate the private portion. For a tax year five or ten years ago, receipts or other records may be difficult to find. That does not mean you should guess. Where appropriate, reconstruct the position using reliable evidence that still exists.

Disallowed deductions can change taxable income and the assessment; penalties or interest may also need separate attention. ATO Fight Back can review the removed claims, identify available evidence, reconstruct calculations where needed and assess the response. Ask whether you can show what the expense was, why it was incurred and how it relates to your tax position.