A real estate agent claimed almost half her income in deductions. The Tribunal allowed $40,000 and kept the 50 per cent penalty.
A real estate agent earning $300,704 claimed almost half of it back in deductions: a ball gown, a costume, makeup, furniture delivered to her door, and the occupancy cost of her home.
The Tribunal allowed just over $40,000 of the $143,788 claimed, and still upheld a 50 per cent penalty for recklessness.
Marsh and Commissioner of Taxation [2026] ARTA 1129.
What got through
The deductions that survived shared two things: a real link to her commission income, and a record to prove it.
Wages paid to helpers for letterbox drops and admin [56]. Advertising, and client gifts (flowers, wine, gift cards) where the purpose was plausible and the invoice was there [84], [128]-[132]. Office consumables, minor property-presentation items, tolls and parking [92], [98]-[100]. Home-office running costs, electricity, internet and phone, apportioned to work use on the Ronpibon principle [108].
Her car was capped at $3,900, the cents-per-kilometre maximum [17]. She wanted the logbook method and $18,762, but the closing odometer reading was an estimate written up after year-end, so she could not substantiate the business-kilometre figure the method demands [33]-[37].
What did not
Occupancy expenses, the rent, mortgage interest and rates on the home, are not deductible for an employee, even one working mostly from home. Using a room for work does not change the home’s private character, so its running costs can be apportioned to work use, but its occupancy costs cannot. The High Court said so in Faichney, Handley and Forsyth, and the Full Federal Court confirmed it this year in Hall [2026] FCAFC 43 [111]-[120].
Conventional clothing is private, however much an agent must look the part, ball gown, costume and makeup included (Cooper, Mansfield) [42]. A logo does not automatically convert ordinary clothes, and here the logos looked like temporary labels, not embroidery [50]-[51]. And $21,628 of staging furniture, bought near her own home purchase and delivered there, was never shown to be work-used [66]-[75].
Why the penalty was recklessness
The Tribunal accepted she did not set out to mislead, and that a lay taxpayer on the ATO website could be led into error [154]-[155]. On its own, that points to 25 per cent, for a failure to take reasonable care [157].
What lifted it to 50 per cent was history. Her 2020-21 return had already been audited and most of the same deductions disallowed; she claimed substantially the same things again, knowing what records were required and not keeping them [158]-[159]. Re-running audited claims is what took her conduct from careless to reckless [160]. The 20 per cent uplift was (sensibly) dropped [149].
Genuine, documented, work-connected expenses are deductible. The home and the work wardrobe are not.
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