Private ruling: Business records
Date of advice: 3 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner accept the referral expenses paid based on records kept for the purposes of lodging your tax return? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1936 Section 262A.

Reasons for decision: Summary: Subsection 262A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) imposes an obligation on a person carrying on a business to keep records that record and explain all transactions engaged in by them that are relevant. Taxation Ruling TR 96/7 Income tax: record keeping - section 262A - general principles provides guidelines on record keeping under section 262A of the ITAA 1936. Relevant records to be kept include documents that are relevant for the purpose of ascertaining the income and expenditure. Bank records, such as credit card or debit card statements and cheque butts can be used with other documents to support the relevant income and expenses. Taxation Ruling TR 97/24 Income tax: relief from the effects of failing to substantiate - provides guidance on circumstances in which relief from the effects of failing to substantiate may apply. Although this ruling and the associated Division 900 of the ITAA 1997 specifically relate to work, car and business travel expenses, the principles may be applied to other record keeping requirements. The Commissioner understands that in some instances it is not always possible to obtain a receipt when an expense is incurred. In these situations you should make a record of the expense showing as much detail as possible. The record should be made as soon as possible after the expense is incurred and contain all the details required on a receipt. A bona fide attempt should be made to comply with the record keeping requirements. In your situation you have bank records showing the referral amounts paid, records showing the date and amount paid, the person it was paid to and the name of the client referred. In these specific circumstances, the Commissioner will accept the amounts paid for commissions based on the records kept to ascertain the business expenses incurred. These amounts can be used to lodge your income tax return.

Relevant facts: Entity A operates a business. | Entity A aims to increase sales by a referral/commission paid to someone that can introduce a new business/customer. | Many of the recipients do not have an ABN and do not provide an invoice. | You keep records of the commission amounts paid and transferred from your bank records. | You also keep records showing the date of the transaction, the amount paid, details of who the amount was paid to and name of the referred client.