AAT affirms ATO decision to disallow NAVY sailor deduction of work related expense

This article is to share our view on the recent Administrative Appeal Tribunal AAT decision on a recent ATO case against the taxpayer Cameron Lambourne, an electronic technician with the Australian Navy about Sailor’s work-related expense.

As one of the most experienced accountants and tax agents in Ashfield Sydney and Adelaide South Australia, we think our readers can benefit from our discussion on this case.

The AAT finding concludes that Mr Lamourne was not entitled to over $10000 in work-related deductions, including gym equipment, and work-related uniforms which he bought.

Case Background

When Mr Lambourne did his tax return, he had claimed over $1,655 in work-related clothing that he had purchased from a store specializing in Naval Maritime Uniform. At the time of the tax audit, Mr Lambourne did not provide the evidence, and he told the ATO that he could claim this because he had an account with the store. ATO was not able to retrieve the record, as the store went into liquidation and can not produce evidence to the ATO. AAT confirmed ATO’s viewpoint in that without sufficient evidence; there is no connection between the uniform cost and the work or the income-producing activities.

Uniform expense

Mr Lambourne also claimed over $6,000 in other work-related expense; however, during the audit, the ATO reduced it down to only $209. Among the $6000 work-related expense, he had claimed $1,688 gym equipment, which he purchased for the ship in his role as a military fitness leader.

GYM Equipment

The ATO argued that the gym equipment was not a requirement by the Navy, and that “out of the generosity of his own heart, [Mr Lambourne] purchased the equipment to the advantage of not only himself but also the other crew members”.

AAT did accept that the taxpayer used the gym equipment in carrying out his duties, but AAT supports the view of the ATO that there is no sufficient evidence between expense incurred and the gaining of his assessable income.

“The fact that a loss or outgoing has a relationship to a taxpayer’s employment or the carrying out of their duties is not enough,”

said AAT member Deborah Mitchell.

“There is no evidence before the Tribunal that [Mr Lambourne] would not have continued to be paid about his duties (be that his salary or allowances) if he had not purchased and supplied these items.

“While there is little doubt these items may have assisted the [Mr Lambourne] to perform his duties better, he was provided with the equipment that his employer considered was required to perform his duties.

“The Tribunal considers [Mr Lambourne’s] expenditure about these items was more akin to providing a benefit to the Navy and his fellow sailors rather than being incurred in the course of producing his assessable income.”

The Tribunal also affirmed the 25 per cent administrative penalty imposed on Mr Lambourne.

What can we do differently to help you

Usually, when we prepare a tax return for an individual with complex circumstances, we will research the topic and form a view. If the matter is complicated, we usually will seek the opinion of the Commissioner through a private ruling or getting a professional tax lawyer advice to support our view. Hence as one of the most experienced accountants and tax agent in Ashfield Sydney and Adelaide South Australia, we would like to hear from you, if the ATO has audited you, we are here to help, please give us a call on 1800-841-312