Claiming repairs done by family members

Hi guys
I am wondering if I can claim an expense for a job done like gardenning or painting by a family member? Will the ATO will accept the receipt?

 

Do they have an ABN?

 

No.

 

Will they declare the income?

 

If you are trying to siphon money to your unqualified teenage children then probably not on.

If employing an adult relative (not spouse) who is a qualified tradesman, getting a tax invoice and paying close to the going rate including GST you should be OK.
Marg

 

But then if the relative doesnt declare, you open them up to the ATO.

 

Why would they be entitled to an abn ?

How does not having an abn affecting deductibility ?

 

Why would a tax invoice be required if the supplier was not registered for GST or required to be registered for GST.

In fact you cant issue a tax invoice. A normal invoice would suffice.

 

Its deductible but you would have to show evidence you actually incurred in an expense
Since its an arms lenght transaction to be safe an invoice (signed statement with the date, relatives name, amount of money, and relatives address, the property address ) from the family member should be kept and best to transfer the money via bank and keep this record to match the invoice.

 

ATO will likely to match the transaction with the return of relatives if the amount warrants a check. I believe it is usually when the amount exceeds $2500, but I cant say for sure. Their matching system is pretty good (from personal experience).

 

Yes, but remember they need to declare it as income on their end too.

 

You are not responsible for another person’s actions.
By all means tell them you are declaring the deduction. If they fail to disclose income then that is their decision.
Marg

 

Thanks guys. This discussion was an eye openner for me. Up to know, most of the job on my IP has been done by a retired friend who is a handy man. He does the job and I pay him in cash and he gives me a receipt. I do not know if he declaires or not.
Does this mean that my receipts are invalid for the ATO?

 

Is there an ABN on the receipt? Sounds like he is conducting a business.

 

Does he give you a proper receipt with full business details? Name, address etc.

Or is it just a page torn out of a generic receipt book anyone can buy at the newsagent?
Marg

 

Yes he gives me a receipt with all her deatail but out of a receipt book from a newspaper.

 

He gives you a receipt with her details?

That is a good way to avoid tax!

 

Sorry Terry. It was a spelling mistake! I meant his details.

 

Why would a receipt from a newsagent book not be a valid receipt for tax purposes if not registered for gst or required to be registered ?

Why would a receipt hand written on plain a4 paper not be valid ?

 

Part IVA could be a factor if a engineered arrangement. eg You pay Dad, Dad earns no other income. ATO may argue Dad didnt do any work. Deduction denied. You object / appeal.

Or it may be a capital expense ?
Nature of work may also be barred by other laws. eg Dad isnt a electrical license holder.

Receipt is part of the issue. Doesnt matter what form it is. But key issue is payment AND that the party did work and fee is not a scheme. Depends on work performed. If Dad is 89 years old and claims to have built a deck the whole of the information may be defeated by the scheme element. Of if its a spouse it could fail the Ï call BS test"....If Dad is 59 and a retired tradie a different matter.

Evasion and avoidance has no time limits for review. A ticking bomb ?

Review commerciality and purpose.