Don't pay cash on Gumtree, Ebay if you want a tax deduction

If you buy a work related item on Gumtree or Ebay, don’t pay cash because you will have no record of the purchase.  This is shown in a recent Tribunal decision.

Background

The taxpayer claimed deductions of $24,802 for purchase of tools and tool boxes.  He argued that he had purchased the tools off Gumtree with cash earned from gambling winnings.

The Commissioner requested Bank Statements to show how the tools were paid.  The taxpayer was unable to substantiate his claims that he kept large cash reserves from gambling winnings.

The taxpayer did not provide any evidence to substantiate the existence of the tools. He did not provide any photos of the tools or witness statements from colleagues who should have seen him using the tools at work.

The taxpayer obtained a hand written ‘tax invoice’ from the seller.   The Commissioner was not able to get in contact with the seller and discovered the seller was not connected with the address provided.

Decision

The tribunal found that the ‘tax invoice’ was a false document and that the applicant never purchased any tools. It was created only for the purpose of creating a transaction for the purposes of obtaining a deduction. This conclusion was further supported by the lack evidence provided by the applicant in substantiating the existence of the tools.

For example, there was no record of the Gumtree advertisement regarding the tools. There were no photos of the “snap on” tools in question (although the taxpayer did have photos of other tools and toolboxes belonging to his father, in his car).

Nor did the taxpayer produce any witness statements of people who may have sighted the “snap on” tools, for example, his manager at his workplace.

The taxpayer’s manager at his workplace confirmed only that the taxpayer “requires tools to perform his job, and there is no secure storage facility for tools”. Significantly, the manager did not reference the “snap on” tools and toolboxes the subject of this dispute.

Although this decision is based on the falsity of the taxpayer’s evidence, it does have important guidance as to suitable evidence of records of work-related purchases made on classifieds such as Gumtree and Craigslist.

Take away 

So:

  • Keep a copy of the Gumtree/ebay advertisement.
  • Have a photo of the items
  • Don’t pay in cash: Pay by direct debit, credit card or paypal

And if in doubt, seek legal advice.

Category: News, Tax