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09 Nov 2018 9 November 2018

Review of substantiation and record keeping

Contemporary substantiation - what does it look like?

The ATO is undertaking a review of substantiation. To that end we have been asked for members thoughts on how to improve record keeping processes for individual taxpayers.

The latest tax gap research indicates that a significant portion of work-related expense adjustments are the result of incorrect or insufficient record keeping. In particular, according to the research:

  • there seems to be a high error rate in relation to apportionment;
  • claims for ‘standard’ deductions where exceptions to substantiation provisions exist is surprisingly common; and
  • some taxpayers insist on a deduction without holding any records at all and have nothing to indicate that they actually spent the money.

We are all no doubt aware of the anecdotal evidence suggesting that clients often present with a shoebox of receipts at tax time.

In our fast-paced, digitally enhanced world, there has to be a simpler way to document expenses and test their veracity!

The rules around substantiation haven’t changed much since the 1980’s - but everything else has moved on. Electronic sales, bank records and record keeping applications have transformed how we capture and store information, opening the door to new ways for individuals to interact with the tax system.

The ATO is investigating the options and we, as members of the Tax Institute, have an opportunity to provide direct input.

Initial consultation shows taxpayers tend to keep records in the format in which they originally get them, whether paper or digital. Come tax time, they dig through filing cabinets and hard drives to collect a mixed bag of document types, leaving their agent with the unpalatable prospect of trawling through them or making a risk-based decision that may cause headaches down the track.

The ATO is keen to tap into your first-hand experience to help them design a substantiation process that makes it easier for clients to record and submit records to their agent.

Let’s try to facilitate the process and help do away with the shoebox of receipts scenario. Let’s lead the way in looking at how we can make record management contemporary, accurate and easy. Think about how technology, automation and real-time guidance can be used to streamline processes, reduce confusion and improve the veracity of claims.

What does your ideal experience look like and what will work best for you and your clients? This is a real chance to be involved in shaping the future direction of record keeping processes – it would be a pity to let it go without having some meaningful input from our members.

To be part of the consultation process, send your feedback at your earliest convenience to 

As always, we welcome your thoughts via the Vine Feedback inbox.  

Kind regards,

Bob Deutsch, CTA