Tax Deductions Frequently Asked Questions
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Work Tax Deductions
You are able to claim expenditure incurred in replacing, insuring and repairing tools of trade that you use for earning your income. If the cost of any item is more than $300, it will have to be depreciated (i.e. claimed over its effective life). The amount you can claim will depend on what receipts you have kept and to what extent you use it for income producing purposes. If you are in the situation where you are wondering what you can claim without receipts, you can claim less than $300 without proof of purchase.
If technical books, trade books or journals are necessary to fulfill your job function efficiently, the cost of their purchase is tax deductible.
Learn more about claiming self-education expenses.
A deduction is available for outdoor workers who buy sunscreen lotion, sunglasses and hats for use at work. The claim must be substantiated and apportioned for private use.
There are two different methods for claiming work related motor vehicle expenses and each have different record keeping requirements. To use the method that ensures you the best claim it is advisable to keep a log book and all receipts for expenses (e.g. insurance, registration, repairs, services, tyres, etc.). You do not have to keep receipts for petrol as H&R Block can work that out for you using a yearly average formula. Your log book should be kept for a minimum of 12 consecutive weeks and generally it will be valid for five years unless there are significant changes in your circumstances. You also need to keep the opening and closing odometer reading for each year.
It is not necessary for you to use the same claim method each year. The choice of method should be made on the basis of which is more favourable to you and which you have the appropriate records for. If you don’t have a current logbook or have not retained all receipts you will be limited in which method you can choose. You cannot, however, claim any car expenses if your car is salary packaged.
Expenditure on personal grooming and haircuts are generally not deductible. There are exceptions for some taxpayers involved in the performing arts field.
Compulsory uniforms are generally deductible provided they identify you as an employee of that organisation or in a specific occupation. A requirement to simply wear particular colours is not enough to make the clothing deductible (for example a waiter being required to wear black and white clothing) nor is a requirement to wear a store’s own brand of clothing (they are still conventional clothing and not tax deductible). Corporate wardrobes are also deductible if certain conditions are met. The uniform design must be registered with AusIndustry. Provided that the clothing is deductible then you may also claim maintenance costs (laundry, dry cleaning and repairs).
Learn more about claiming a tax deduction for work clothing.
Fashion clothing is not tax deductible even if your employer requires you to wear it. Because the logo is a part of the design of the clothing and does not in itself identify you as an employee it will still not be claimable.
You cannot just claim $300. You must actually incur any expense before it is claimable. Whilst you may not need receipts for expenditure up to $300 you must have spent the money and it must be relevant to your employment.
Travel Tax Deductions
Your travel must be relevant to your job function for you to be eligible to claim a deduction for those expenses. Where this is the case, and you have the necessary documentation, you can claim the cost of transport and incidentals. If your travel involved an overnight stay you would be able to claim for meals. Travel overseas also requires you to keep travel diary.
A deduction will only be allowed if you have actually incurred a work-related expense and have the necessary documentation. Travel to and from your job is generally not claimable unless, for example, you are carrying bulky equipment. Some awards allow for a payment of an allowance even though an expense is not necessarily incurred by the employee. If a deduction can be claimed it cannot be for more than the expense that you incurred even if the allowance that you have received was higher.
You cannot claim the cost of the trip because the main purpose was to have a holiday and attendance at the seminar was incidental to this. You will only be able to claim the additional expenses that you incurred to attend the seminar. These could include the registration fee, taxi fare to the seminar, etc.
Business Tax Deductions
If a taxpayer carries on all or part of their employment activities from home and has an office set aside to do the work, some portion of the running expenses can be deducted. A diary should be kept for a minimum of 4 weeks stating hours the office was used for work related purposes. The Commissioner’s rate of 45 cents per hour can then be claimed for the hours the home office is used. Only running expenses (electricity, heating and depreciation of office equipment) can be claimed for home office unless the home is being used as a place of business.
Where a home is a place of business (and is easily identified as such – for example a separate entrance, signage, clients/customers coming to set area of your home etc.), deductions can be claimed on occupancy and running expenses including:
- mortgage interest
- house insurance
- council rates
- pest control
Installation costs are not deductible. However, part of the rental costs are deductible where a taxpayer is required to make calls from home. Call costs would be deductible and a log of calls must be kept for a minimum of 4 weeks. Mobile phones are claimed in the same way.
Items like this that you buy for use in your job can be claimed in your return. However, since the cost of these items is most likely to be more than $300 each you will not be able to claim the full cost in one year.
It will be necessary to spread your claim over the useful life of the items (depreciation) and only the work-related proportion is claimable. You should keep a log of work related use for a period of at least four weeks for each item to determine the proportion that you can claim.
The ATO have confirmed that the iPad will be treated as the equivalent of a laptop. If it is used to produce assessable income (i.e. for work related activities) a claim could be made. Any claim will have to be adjusted where there is private use and if the iPad cost more than $300 the work-related proportion would have to be depreciated over its effective life. You should keep a log of work related use for a period of at least four weeks to determine the proportion that you can claim.
Family Tax Deductions
Child care expenses are not claimable as a tax deduction. Eligible taxpayers may be able to claim the Child Care Tax Rebate (CCTR) through the Family Assistance Office.
Charity Tax Deductions
You cannot claim a deduction for this because it is not a donation to the charity; rather you are receiving something for your money. Buying an item from a charity does not make your purchase tax deductible. The same applies to the purchase of raffle tickets. Only donations to registered charities are tax deductible.
Other Tax Deductions
There is no limit on the amount claimed each year, provided the expenses are necessarily incurred in earning your income. The expenditure must be work related and you may need receipts to substantiate the expenditure. Keeping incomplete, incorrect or no records at all may be limiting your ability to claim deductions. Advice can be obtained from a registered tax agent. H&R Block are happy to advise their clients on appropriate record keeping that will enable them to maximise their allowable deductions.
Provided it gives full details of the supplier and date of purchase the tax office would accept a credit card slip as proof of purchase. Taxpayers can make a notation on the document indicating the type of goods that were purchased. Many taxpayers use the internet to purchase or pay for their work related expenses and so the ATO will also accept Bpay or email receipts provided they contain the necessary information: date, supplier, nature of the goods and the amount.
Documentary evidence should be kept for five years from the date of lodgement of the tax return in which the claims are made. If you are depreciating an asset the receipt should be kept until the item is fully depreciated (even if over 5 years).
Fees paid to a registered tax agent (like H&R Block) for preparation of your return, amendments and generally handling your tax matters are all deductible. You can also claim travel to your registered tax agent (you are limited per income tax return to 5,000km in total across the entire return if claiming the c/km method). Registered tax agents are the only people legally able to receive payment for the preparation of tax returns.
At H&R Block nothing is too complicated. We can assist you with any number of tax questions. Find an office near and book an appointment online or call 13 23 25.