Expense Report
An expense report is a formal record of business related costs paid by an individual. It is used to claim reimbursement from an employer or to claim tax deductions from the ATO under the Income Tax Assessment Act 1997. It requires receipts and proof of business use.
A record of business expenses incurred by an employee or contractor. It tracks costs for reimbursement or tax deduction purposes.
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About this Document
An Expense Report is a fundamental document used by Australian businesses, tradespeople, and employees to track and claim work related costs. It serves as an official record of money spent on behalf of the business. This includes purchasing materials, paying for travel, covering client meals, or buying tools. The report ensures the business can reimburse the worker correctly and claim tax deductions from the Australian Taxation Office or ATO. For sole traders and subcontractors, an expense report is often part of their record keeping to prove business deductions. For employees, it is the document submitted to get their own money back. In Australia, you need this document whenever you spend your own funds for work purposes. If you drive your personal vehicle to a client site, you must log the kilometres. If you buy timber for a job before you invoice the client, you record the receipt. If you stay overnight in a hotel for work, you keep the folio. Without an expense report, businesses struggle to manage cash flow. More importantly, poor records lead to problems with the ATO. The Tax Office requires proof that expenses were actually incurred and that they relate to earning assessable income. An expense report links the receipt to the work activity. You must complete the report accurately and honestly. The process starts when the money is spent. You must collect a valid tax invoice or receipt. A valid receipt under Australian law shows the supplier, ABN, date, amount, and GST. You then enter this data into your expense report. You list the date, the amount, the supplier, and the category of expense. Categories might include vehicle expenses, tools and equipment, materials, or travel. You must also write a brief description of the work reason. This is . It proves the expense was not for personal use. Once the report is filled out, you attach the original receipts. You then submit it to your employer or your accounts team. They review the claim. They check if the expense follows company policy and Australian Taxation Office rules. If approved, they pay you back. In a larger company, the manager might sign off on the report. In a small business, the owner might do it. For tax purposes, the business keeps the report and receipts for five years. This is a legal requirement under the Taxation Administration Act 1953. If the ATO audits the business, these documents are the evidence. If you cannot produce them, the ATO may disallow the deduction. This means the business pays more tax. It could also lead to penalties. Australian law sets specific rules for what you can claim. You can only claim expenses that are necessarily incurred in earning your income. This comes from Income Tax Assessment Act 1997. If an expense is private or domestic, you cannot claim it. For example, you cannot claim the cost of driving from your home to your regular workplace. This is called commuting. However, if you travel from your office to a client, that is work related. You must record these details clearly. There are strict rules for substantiation. You need written evidence for any expense over 75 dollars, excluding travel allowance expenses that fall within reasonable rates set by the ATO. For travel allowances, you can use the reasonable rates instead of keeping receipts for every meal, as long as you do not exceed the rate. But you must still record the trip dates and locations in your report. The Fair Work Act 2009 does not explicitly mandate expense reports. However, it covers reimbursements. If an employee incurs a expense in the course of their employment, the employer must reimburse them. This is often part of the National Employment Standards or an Award. An expense report is the mechanism to request that reimbursement. Modern Awards in Australia often contain clauses about uniforms, tools, and travel allowances. Employers must pay these allowances on top of the base wage. The expense report helps calculate the correct amount. If you work in the building and construction industry, the Building and Construction General On-site Award 2020 has specific rules about fares and travel allowances. You need accurate records to ensure you are paid correctly. Workplace Health and Safety or WHS laws also play a role. If you buy safety gear like steel capped boots, a hard hat, or high visibility shirts, these are tax deductible and often reimbursable. You must list these on your expense report. The WHS Act 2011 requires employers to provide a safe workplace. Providing reimbursement for personal protective equipment is part of this duty. The expense report tracks that the employer has met this obligation. For goods and services tax or GST registered businesses, the expense report is vital for claiming GST credits. If you buy a tool for 110 dollars including 10 dollars GST, you can claim that 10 dollars back from the ATO. But only if you have the valid tax invoice and record it in your business accounts. The expense report feeds into your Business Activity Statement or BAS. If you forget to record it, you lose the credit. It costs the business money. Technology is changing how people handle expense reports. Many Australian tradespeople now use apps on their phones. They take a photo of the receipt and upload it instantly. This links to accounting software like Xero, MYOB, or QuickBooks. However, the core principles remain the same. You must prove the purchase was business related. Even with apps, you need to check the data. You must ensure the date and amount are correct. You must categorize it correctly. ASIC rules apply to companies regarding financial record keeping. Directors have a duty to keep accurate financial records. Expense reports are part of these records. If a company fails to keep proper records, ASIC can impose fines or disqualify directors. Common mistakes to avoid are mixing personal and business expenses. You must claim only the business portion. If you buy a ladder that you use 50 percent of the time for home jobs, you can only claim 50 percent of the cost. You must calculate this portion on the report. Another mistake is losing receipts. Without a receipt, you generally cannot claim the expense. If the receipt is faded, you might need a bank or credit card statement as secondary evidence. But the ATO prefers the supplier issued receipt. Another error is missing the deadline. Employers often have strict time limits for submitting claims. If you wait six months, the accounts team might reject it. There are also specific rules for motor vehicle expenses. You can choose the logbook method or the cents per kilometre method. If you use the logbook method, you must keep a logbook for 12 weeks. You record every trip for that period. The expense report then uses the percentage derived from the logbook to calculate the claim. If you use the cents per kilometre method, you claim a set rate per kilometre, up to 5000 kilometres per year. You do not need receipts for fuel, but you must have a record of the kilometres travelled. This record can be a simple diary or a spreadsheet, which acts as your expense report. Home office expenses are another area. Since COVID 19, many people work from home. The ATO has a shortcut method. It allows a claim of 80 cents per hour for all running expenses. You do not need receipts, but you must keep a record of hours worked. This is a form of time based expense report. For the fixed rate method, you need to keep a diary for four weeks. This records your hours and the additional running expenses you incur. This record is essential. Ongoing expenses like internet and phone bills need an apportionment. You calculate the percentage of business use versus private use. You claim the business percentage on your report. When you complete an expense report, be precise. Write clearly. Attach the receipts to the physical report or upload them to the digital file. Do not round amounts up or down excessively. Use the exact figure on the receipt. Be honest. False claims are tax evasion. This is a serious offence. It can lead to heavy fines and prosecution. The ATO uses data matching to detect fraud. They check credit card data and bank records against reported income. If you claim a large expense but your income is low, it raises a red flag. For Australian small business owners, good record keeping is the key to survival. It reduces stress at tax time. It helps you understand where your money goes. It improves cash flow management. You can see if your material costs are rising. You can check if your fuel costs are too high. This helps you price your jobs better. If you undercharge because you do not know your true expenses, you lose profit. The expense report is not just paperwork. It is a business tool. It helps you stay compliant with the law. It ensures you get reimbursed. It ensures you pay the right amount of tax. In summary, an expense report is a detailed list of work related costs. It requires receipts. It requires a business reason. It must be kept for five years. It supports claims under the Income Tax Assessment Act 1997. It supports compliance with the Fair Work Act 2009 regarding reimbursements. It supports safety obligations under the WHS Act 2011. Whether you are a plumber, an electrician, a builder, or an office worker, if you spend your own money for work, you need an expense report. Create one every time you spend. File it correctly. Submit it on time. This is professional practice. It is required by law. It protects you and the business.
Key Facts
- Employers must reimburse employees for expenses necessarily incurred in the course of their employment.— Fair Work Act 2009 (Cth)
- You can claim a deduction for expenses incurred in earning your assessable income, but not private or domestic expenses.— Income Tax Assessment Act 1997 (Cth)
- Businesses must keep records for most transactions for 5 years.— Taxation Administration Act 1953 (Cth)
- A tax invoice must show the supplier's ABN, the date, and the GST amount to be valid for GST credits.— A New Tax System (Goods and Services Tax) Act 1999 (Cth)
- Employers have a duty to provide or reimburse for personal protective equipment to ensure worker safety.— Work Health and Safety Act 2011 (Cth)
Sources
Required Sections
Purpose of the Report
Explains why the document is used for reimbursements and tax compliance.
This Expense Report serves two critical purposes for your business. It supports the reimbursement of employees for work related costs. It also establishes the evidence required for Australian Taxation Office (ATO) tax deductions. You must complete this report accurately to claim these expenses under the Income Tax Assessment Act 1997. Specific records are mandatory by law. This document meets those legal requirements.
Employee Reimbursement You may use this report to claim back money spent on behalf of the business. This includes materials purchased for a specific job or fuel for the company ute. The report proves the money was spent for business purposes. It protects you under the Fair Work Act 2009 regarding employee entitlements. You must attach a valid tax invoice for every expense claimed. A bank or credit card statement is not enough on its own. The invoice must show the supplier name, ABN, date, and amount. Without this document, you cannot legally verify the transaction. The reimbursement is not taxable income for the employee. It is a recovery of a business expense.
Tax Deductions This report records expenses you claim as deductions on your business tax return. The ATO requires strict proof for every dollar claimed. The records must explain the business connection. For example, a receipt from Bunnings must list the specific tools or materials bought. A generic receipt just stating "hardware" is not sufficient. You must write the job name or client details on the report. This links the cost directly to your income. The Taxation Administration Act 1953 mandates you keep records for five years. This report forms part of those official records.
Good Record Keeping habits Keep personal and business expenses separate. Do not use this report for private spending. Mixing funds makes it difficult to prove business use. If an expense is partly private and partly work, you can only claim the work portion. You must calculate the correct percentage on the report. For motor vehicle expenses, use a logbook to determine the business use percentage. Apply that percentage to the total fuel and maintenance costs listed. The ATO checks these records during audits. Incomplete records lead to denied deductions and penalties.
Completing this report correctly saves time. It ensures you receive full reimbursement and pay the correct amount of tax. It also keeps your business compliant with Australian standards.
Eligible Expenses
Details what costs can and cannot be included.
Eligible Expenses
You must be able to prove that your expenses were directly related to earning your assessable income. According to the Income Tax Assessment Act 1997, a deduction is generally allowed for any loss or outgoing you incur to the extent it is incurred in gaining or producing your assessable income. However, the Act specifically prohibits deductions for private or domestic capital outlays. You need to keep accurate records for every purchase.
Deductible Expenses
You can claim the cost of materials and supplies used in your daily work. This includes timber, steel, concrete, paint, glue, and hardware. For tools and equipment, you can usually claim an immediate deduction for items costing less than the relevant threshold set by the Australian Taxation Office. Expensive tools costing more must be depreciated over their effective life according to Division 40 of the Income Tax Assessment Act 1997.
Protective gear is also a valid expense. You can claim the cost of safety boots, high visibility vests, hard hats, safety glasses, and sun protection if your job requires you to work outdoors.
Travel expenses are deductible when you travel for work and not just to and from your regular workplace. You can claim the cost of using your personal vehicle for work trips. You must keep a logbook for a continuous 12 week period to claim the percentage of work use if you use the logbook method. Accommodation and reasonable meal expenses are deductible when you are required to stay away from your home overnight for work.
Other allowable deductions include public liability insurance and professional indemnity insurance premiums. You can also claim the cost of work related phone and internet usage based on the percentage of work use.
Non Deductible Expenses
You cannot claim expenses that are private or domestic in nature. The cost of normal clothing is never deductible, even if you only wear it to work. You cannot deduct the cost of suits, jeans, dress shirts, or shoes, because the Commissioner of Taxation considers these items conventional clothing rather than a compulsory uniform.
Fines and penalties are strictly non deductible. Section 26-5 of the Income Tax Assessment Act 1997 states you cannot deduct a penalty imposed under an Australian law. This includes parking fines and speeding fines you receive while driving for work.
Travel between your home and your regular place of work is considered private travel. You cannot claim a deduction for this commute under tax law. Expenses related to buying lunch or snacks during your normal work day are also generally not deductible unless you are travelling for work.
Make sure you keep receipts for all business purchases. Records must be kept for five years.
Record Keeping Requirements
Covers the legal requirements for receipts and document retention.
Record Keeping Requirements
You must keep accurate records of all business expenses to claim a tax deduction. The Australian Taxation Office (ATO) requires you to keep records for five years. This five-year period generally starts from the date you lodge your tax return. If you amend your return or the ATO reviews it, you might need to retain the records longer. You must store these records in a way that protects them from damage and ensures they are accessible when the ATO requests them. Digital copies are acceptable if they are a true and clear reproduction of the original.
To claim a credit for the Goods and Services Tax (GST), you must hold a valid tax invoice for purchases over $82.50. For amounts under $82.50, you do not need a full tax invoice, but you still need a document proving the purchase occurred. You can keep a cash receipt docket or a notebook entry if it lists the date, cost and supplier.
A tax invoice is valid only if it contains specific information required by A New Tax System (Goods and Services Tax) Act 1999. For a purchase of more than $1,000, the document must include your business name or identity, the supplier's Australian Business Number (ABN), the date of issue, a brief description of the goods or services, the total amount payable and the words "Tax Invoice" displayed clearly. It must also show the GST amount if the total price is over $1,000. If the sale is less than $1,000, the document must show the GST amount, or state that the total includes GST.
A receipt serves as proof of purchase. The ATO checks receipts to verify the expense relates to your business income. To make a receipt valid, ensure it shows the name of the supplier, the date of the transaction, the amount paid and a description of what you bought. Bank statements alone are usually not enough because they do not detail what was purchased. Eftpos receipts are often acceptable for small amounts, but combine them with itemised dockets whenever possible.
Use software or a dedicated system to track these records immediately. Waiting until the end of the financial year often leads to lost dockets and missed deductions. Under Taxation Administration Act 1953, failing to keep proper records can result in penalties. Keep your personal and business expenses separate. Having clear, valid records supports your claims and makes the process smoother if an audit occurs.
Submission Process
How to fill out and submit the report to the employer.
To submit an expense claim, you must complete the submission process accurately to ensure compliance with Australian Tax Office (ATO) requirements and the Income Tax Assessment Act 1997. Follow these steps to finalise your report.
Start by entering all mandatory details into the expense form. You need to list the date of the purchase, the supplier name, and the total amount paid. Clearly state the business purpose for every expense. The ATO requires a direct connection between the expense and your business income. Vague descriptions like 'miscellaneous' or 'general supplies' are not acceptable. You must specify what you bought and how it helps you earn your income. For example, write '60mm copper pipe for Smith bathroom renovation' rather than just 'materials'.
Next, attach valid proof of purchase for every item. Under Australian law, you must keep records for five years. A receipt acts as evidence of the transaction. It must show the name of the supplier, the amount of GST, the date, and what you bought. If you lose a paper receipt, a bank or credit card statement is not enough on its own. You should contact the supplier to get a copy. For purchases under $10, the ATO allows you to keep a diary entry instead of a receipt, but you must still record the specific details.
Check the GST amounts carefully. If you are registered for GST, you are claiming a credit from the government. Incorrect claims can trigger penalties. Make sure you only claim GST on expenses that actually included it. Some items, like bank fees and insurance, are often GST-free. Do not claim the GST component on these items.
Once the details are complete, you must sign the declaration. By signing, you are legally declaring that the expenses are genuine and solely for business purposes. Making a false declaration can lead to serious consequences under the Taxation Administration Act 1953.
Finally, send the completed report to your manager or the accounts department. Do not send original paper receipts if you can avoid it, as you are responsible for keeping them safe. Scan the receipts and attach them to the digital form or email. If you use a cloud-based accounting software, upload the digital copies directly to the system. Submit the report by the due date set by your business, usually within the first week of the following month. Late submissions can delay your reimbursement and complicate your monthly Business Activity Statement (BAS) reporting. Keep a copy of the final submitted report for your own records.
Optional Sections
Common Mistakes
Frequent errors made by employees and how to avoid them.
Get your expense claims right the first time. The Australian Taxation Office (ATO) requires strict proof for every deduction you claim. If you fail to meet the requirements, the ATO will disallow the claim. You might also face fines and penalties. Here are the most common mistakes tradespeople and small business owners make on expense reports.
Missing Receipts A lost receipt is a lost deduction. The law says you must keep written evidence for most expenses over $10. For expenses under $10, you can keep a record in a logbook if the total is less than $200. However, you need a receipt for any single purchase over $10. You should use the myDeductions tool in the ATO app to photograph and store receipts straight away. Do not rely on bank statements. The ATO states that bank or credit card statements are not enough evidence on their own. They show money went out, but not what you bought. Store your digital or paper receipts for five years. This helps if the ATO asks to audit your records.
Mixing Personal and Business Costs You must keep your private spending separate from business spending. Using a single bank account for everything creates a mess. It makes it hard to prove an expense was work related. You can only claim the part of an expense that relates to earning your income. If you use your personal vehicle for work, you must keep a logbook to work out the business use percentage. You cannot claim the full cost of personal mobile phone plans or internet packages unless you use them only for business. You must calculate the work related portion. The ATO checks these calculations closely. If you do not keep accurate records, they will deny the claim.
Missing Submission Deadlines Late reports hurt your cash flow and your compliance standing. If you employ staff, you must pay their Superannuation Guarantee contributions by the quarterly cut off dates. The ATO charges the Superannuation Guarantee Charge if you pay late or miss the deadline. This charge is not tax deductible. It includes interest and an administration fee. It is an expensive mistake to make. You also need to lodge your Business Activity Statement on time. Missing the due date means you pay interest on any debt owed to the ATO. Set calendar reminders for all due dates. Submit your expense reports to your bookkeeper or accountant early. This gives them enough time to fix errors before the lodgement date.
Tax Implications
How the report affects GST and income tax.
The data in this expense report determines your ability to claim Goods and Services Tax credits and income tax deductions. You must ensure every entry meets the strict requirements set by the Australian Taxation Office.
To claim GST credits, the expense must be a taxable purchase related to your business activities. The report clearly separates amounts into GST inclusive and GST free columns. You can only claim a credit for the GST portion if you hold a valid tax invoice. Under A New Tax System, your invoice must show the supplier's Australian Business Number, the total price, and the specific GST amount. If the total price is less than $82.50, the ABN requirement is relaxed, but the document must still state the total GST payable. Check the report carefully. Do not claim a credit for expenses that are GST free, such as basic bank charges or some food items, because no GST was paid to the supplier.
For income tax deductions, you must rely on the general deductibility provisions in the Income Tax Assessment Act 1997. Specifically, Section 8-1 allows you to deduct a loss or outgoing if it is incurred in gaining or producing your assessable income, or it is necessarily incurred in carrying on a business. The cost must not be of a private, domestic, or capital nature. Use this report to verify that each expense directly relates to earning your business income. Work-related travel and safety equipment are common acceptable claims. However, you cannot deduct fines incurred while working for your business, as Section 26-5 specifically prohibits deductions for legal penalties.
Substantiation is critical. The records in this report serve as evidence of your spending. The Taxation Administration Act 1953 mandates that you keep written evidence for five years. Simply having a credit card statement is not enough. You need the supplier name, date, cost, and the nature of the goods or services. If you pay for an item using personal funds and then reimburse yourself, ensure the receipt is attached to this report. Without proper documentation, the ATO will disallow both the GST credit and the income tax deduction during an audit. Keep your business and private expenses separate to avoid complications.
Frequently Asked Questions
What is an Expense Report?
When do I need an Expense Report?
Is an Expense Report legally required in Australia?
What receipts do I need for an Expense Report?
Can I claim GST on my expenses?
How long do I keep Expense Reports?
What if I lost a receipt for my Expense Report?
Can I claim travel to and from work?
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