An ATO audit can be stressful, particularly if you are asked to prove the deductions you claimed on your tax return. However, having the right records from the beginning can make the process much easier.

In this discussion, Latitude Accountants CEO John Saade explained how the ATO may request receipts, employer confirmations, logbooks, calculations, and other evidence when reviewing work-related deductions. The key lesson is simple: if you claim a deduction, you should be prepared to substantiate it.

Keeping good records is not just about preparing for an audit. It can also help you and your accountant accurately calculate deductions and identify whether an expense is genuinely connected to earning your income.

Here is an ATO audit checklist covering 10 important types of documents you should keep for your tax deductions.

Why Is Documentation Important for Tax Deductions?

Generally, a work-related expense needs to meet certain requirements before you can claim it as a deduction. As John Saade highlighted, taxpayers should be able to demonstrate that:

• They paid for the expense themselves.
• The expense was not reimbursed by their employer.
• The expense was directly related to earning their income.
• They have records supporting the claim.

The amount you claim is also important. Unusually high deductions compared with other taxpayers in a similar occupation may attract additional attention from the ATO.

Good documentation gives you evidence to support your claims if the ATO asks questions.

ATO Audit Checklist: 10 Documents to Keep

1. Receipts and Tax Invoices

Receipts are among the most important records to retain when claiming deductions.

Keep copies of receipts and tax invoices for eligible expenses, including items such as:

• Work-related equipment
• Computer parts and consumables
• Work-related travel
• Parking and taxi expenses
• Professional memberships
• Tax-related expenses
• Work-related clothing
• Other eligible purchases

A bank or credit card statement can show that money was spent, but it may not provide enough detail about exactly what was purchased. Where possible, retain the original receipt or tax invoice.

2. Employer Letters and Confirmations

Some deductions may require evidence from your employer.

For example, an ATO review may ask for confirmation that you were required to use your own:

• Vehicle
• Mobile phone
• Other work equipment

The employer confirmation may also need to explain how the item was used for work and whether you received any allowance or reimbursement.

This is why it is important to understand your employer’s requirements before claiming a significant work-related expense.

3. Car Logbooks

If you use the logbook method to calculate your work-related car expenses, maintaining an appropriate logbook is essential.

Your records should help demonstrate:

• The purpose of each journey
• Odometer readings
• Total kilometres travelled
• Work-related kilometres
• The calculation of your work-use percentage

You should also retain supporting documents for vehicle expenses, such as relevant receipts, registration records and lease documents where applicable.

4. Fuel and Vehicle Expense Receipts

A vehicle deduction can involve more than simply keeping a logbook.

Retain receipts and supporting records for expenses such as:

• Fuel
• Servicing
• Repairs
• Registration
• Insurance
• Lease costs where applicable
• Other eligible vehicle expenses

The documentation should allow you to demonstrate how the amount claimed was calculated and what portion relates to work.

5. Travel, Tolls, Parking and Taxi Receipts

Work-related travel expenses can require detailed evidence.

Keep records such as:

• Travel receipts
• Toll statements
• Parking receipts
• Taxi or rideshare receipts
• Details showing the work-related portion of the expense

If your employer reimbursed an expense, you generally cannot claim the same expense as a deduction. Keeping records of reimbursements can therefore help establish the correct amount to claim.

6. Work-Related Clothing and Laundry Records

Not every item of clothing you wear to work is deductible.

Depending on the circumstances, eligible work-related clothing may include occupation-specific or protective clothing, or certain uniforms that meet the relevant requirements.

Keep:

• Clothing receipts
• Laundry or dry-cleaning receipts where available
• Records describing the clothing
• Evidence supporting why the clothing is work-related

For example, simply buying a black shirt for work does not automatically make it a deductible expense.

7. Mobile Phone and Internet Records

Mobile phone expenses can require evidence showing the work-related portion of your use.

Depending on the circumstances, useful records may include:

• Itemised phone bills
• Records of work and private use
• A representative four-week diary
• Employer confirmation that you were required to use your phone for work
• Calculations showing how you determined the deductible percentage

Avoid simply estimating a high work-use percentage without evidence to support it.

8. Home Office Records

If you claim expenses relating to working from home, maintain records showing how you calculated the claim.

This may include:

• A diary or record of working-from-home patterns
• Relevant expense receipts
• Calculations of the work-related portion
• Evidence supporting the method used
• Employer confirmation where relevant

A record covering a representative period can help demonstrate your actual working pattern rather than relying solely on an unsupported estimate.

9. Equipment, Computer and Depreciation Records

Equipment purchased for work may involve deductions for the relevant work-related portion, including depreciation where applicable.

Keep:

• Purchase invoices
• Receipts
• Equipment details
• Depreciation schedules
• Calculations showing work-related use
• Evidence explaining how the item relates to your income-earning activities

Where an item has both private and work use, your records should support the percentage you claim.

10. Records for Other Deductions

Finally, retain documentation for other deductions you claim.

Depending on the expense, this could include:

• Professional membership invoices
• Donation receipts
• Tax agent invoices
• Other work-related expense receipts
• Bank or payment records
• Written explanations supporting the work-related purpose

The important point is to keep enough information to demonstrate what the expense was, how much you paid, and why it relates to your income.

How Long Should You Keep Your Tax Records?

Taxpayers should retain the records needed to support their tax affairs for the required period. The appropriate retention period can depend on the type of record and the circumstances.

Rather than throwing documents away as soon as a tax return has been lodged, maintain an organised record-keeping system so that your supporting evidence remains available if questions arise later.

Digital copies can also make it easier to organise and retrieve receipts and other documentation.

What Should You Do If the ATO Requests Your Documents?

If you receive an ATO audit or review letter, do not ignore it.

Start by carefully checking:

1. What the ATO is reviewing.
2. The deductions or claims identified in the letter.
3. The documents and explanations requested.
4. The deadline for responding.
5. Whether you can substantiate each claim.

Avoid sending documents randomly without first understanding your position. Review your tax return and supporting records so you know what you can substantiate.

If you are uncertain about how to respond, getting professional accounting advice can help you understand what information is required and how to address the ATO appropriately.

Build Your Tax Deduction Records Before You Need Them

The best time to organise your deduction records is before an ATO audit ever happens.

Keeping receipts, employer confirmations, logbooks, calculations and other supporting evidence throughout the year can make tax preparation easier and give you greater confidence in your claims.

As John Saade explains, a deduction should not simply be viewed as an amount that reduces your taxable income. You should also consider whether you could prove the claim if the ATO asked questions about it.

Good record-keeping therefore forms an important part of responsible tax planning.

Frequently Asked Questions About ATO Audit Documentation

What documents should I keep for tax deductions?

Keep receipts, tax invoices, employer confirmations, logbooks, travel records, phone bills, home office records, equipment invoices and other documentation supporting your deductions.

Can a bank statement replace a receipt?

A bank statement can help show that a payment was made, but it may not contain enough information to establish what was purchased or why it was deductible. Where possible, retain the original receipt or tax invoice.

Do I need an employer letter for work-related deductions?

Not every deduction requires an employer letter. However, certain claims may require evidence that your employer required you to use your own vehicle, phone or other resources for work.

What happens if I cannot prove a tax deduction?

If you cannot substantiate a deduction when the ATO requests evidence, the deduction may be reduced or disallowed. Depending on the circumstances, additional tax, penalties or interest may also apply.

Should I speak to an accountant if I receive an ATO audit letter?

Yes. An accountant can help you review the audit request, identify the evidence required and understand how to respond based on your circumstances.

Get Help With Your Tax and Accounting

Keeping the right records can help you claim eligible deductions with greater confidence and be better prepared if the ATO asks questions about your tax return.

Latitude Accountants provides proactive accounting, taxation and business advisory services to individuals and businesses across Australia. If you need help with your tax return, deductions or an ATO review, speak with the Latitude team.

Latitude Accountants

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Disclaimer

This article provides general information only and does not constitute financial, legal, tax or business advice. Tax rules and record-keeping requirements can vary depending on individual circumstances. Speak with a qualified accountant or tax adviser for advice relevant to your situation.