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

This article shares our view on the recent Administrative Appeal Tribunal (AAT) decision regarding the ATO case against Cameron Lambourne, an electronic technician with the Australian Navy about the Sailor’s work-related expense.

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

The AAT concluded that Mr. Lambourne was not entitled to over $10,000 in work-related deductions, including expenses for gym equipment and work-related uniforms he purchased.

Case Background

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

Uniform expense

Mr. Lambourne also claimed over $6,000 in other work-related expenses, but during the audit, the ATO reduced it to only $209. Among the $6,000 in work-related expenses, he claimed $1,688 for 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 Mr. Lambourne purchased the equipment out of generosity for the benefit of himself and other crew members. The AAT acknowledged that the taxpayer used the gym equipment to carry out his duties but supported the ATO’s view that there was no sufficient evidence linking the expense to the gaining of his assessable income.

AAT member Deborah Mitchell stated, “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.” She added, “There is no evidence before the Tribunal that Mr. Lambourne would not have continued to be paid for his duties, whether his salary or allowances if he had not purchased and supplied these items.”

Mitchell continued, “While there is little doubt these items may have assisted Mr. Lambourne in performing his duties better, he was provided with the equipment that his employer considered necessary for his duties. The Tribunal considers Mr. Lambourne’s expenditure on 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 percent 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’s advice to support our view. Hence as one of the most experienced accountants and tax agents 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