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Tax Deductions When Lodging Taxes Online

By H&R Block 2 min read
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Is your vehicle classified as a 'car'?

Vehicles are split into two categories: 'car' and 'other'. A 'car' is defined as a motor vehicle (excluding motor cycles and similar vehicles) designed to carry a load less than one tonne and less than nine passengers. 'Other' vehicles include: motorcycles and vehicles with a carrying capacity of one tonne or more, such as a ute, truck or panel van, and vehicles that are designed to carry nine passengers or more, such as a minivan. Different rules apply for these two categories. 'Cars' can use the fixed rate cents per km method or the log book method to claim vehicle expenses. Those vehicles classified as 'other' (non-car) vehicles must claim actual expenses based on a log book and business percentage use.

Car expenses

"If your vehicle is classes as a 'car', then you have two methods available to you in calculating a car expenses claim:

  • the cents per kilometre method, which allows a deduction of 72 cents per km, but limits you to 5000 business kilometres or
  • the logbook method, which calculates your deduction by dividing total car expenses by the work-related percentage the car was used for the taxable purpose.

If you've kept records pertaining to both methods, this page will determine which will result in the best outcome for you. "

Log book

A log book allows you claim actual expenses for running your vehicle and should be representative of the average vehicle use. We work out your business use percentage by dividing the distance travelled for business by the total distance travelled then multiplying by 100. We then tally your total car expenses and multiply this by your business use percentage to apportion your claim.

If this is the first year you have used the logbook method, you must keep a logbook for at least 12 continuous weeks during the income year. That 12-week period needs to be representative of your travel throughout the year. If the usage of the vehicle doesn't change, then this 12 week sample is valid for five years.

When using the logbook method, you may also be able to claim depreciation on your vehicle.

Your logbook must contain:

  • when the logbook period begins and ends
  • the car’s odometer readings at the start and end of the logbook period
  • the total number of kilometres the car travelled during the logbook period
  • the number of kilometres travelled for each journey. If you make two or more journeys in a row on the same day, you can record them as a single journey
  • the odometer readings at the start and end of each subsequent income year your logbook is valid for
  • the business-use percentage for the logbook period
  • the make, model, engine capacity and registration number of the car.

For each journey, record the:

  • reason for the journey (such as a description of the business reason or whether it was for private use)
  • start and end date of the journey
  • odometer readings at the start and end of the journey
  • kilometres travelled.

General car expenses

The following are car expenses you typically can claim:

  • travel between two workplaces (for the same business), or directly between two places of business (two separate businesses) or between constantly shifting places of business.
  • travel between your home and your place of employment if your work entails carrying bulky tools or equipment or if your home is your base for your business.
  • travel from your normal workplace to an alternative workplace (that isn't a regular workplace) and back to your normal workplace or directly home
  • travel from your normal workplace or your home to an alternative workplace that is not a regular workplace – for example, a client’s premises
  • perform itinerant work.
  • delivering or collecting supplies (unless this is incidental to the journey).

You cannot claim:

  • travel between your home and place of business even if you do minor tasks, for example, picking up the mail, on the way to your place of business
  • travel if you have to travel between your home and place of business more than once a day
  • travel if there is no public transport near where you have your business
  • travel relating to work outside normal business hours even if you receive an on-call allowance.
  • car expenses for a vehicle that has been salary sacrificed or where you have been reimbursed for these expenses.

If you receive an allowance from your employer for car expenses, it is assessable income and the allowance must be included on your tax return. The amount of the allowance is usually shown on your income statement or payment summary.

Clothing expenses

Expenses that you incurred towards the purchase, rental, and maintenance of approved work-related uniforms are generally tax deductible. Be sure to retain your receipts, invoices, or other evidence substantiating the expense. Laundry expenses of $150 or under can be claimed by keeping a diary and do not require receipts. Laundry claimed up to $150 is calculated per load, being either $1 per load when eligible items are only washed together, or 50c per load if eligible items are mixed with your other clothing.

Uniforms include:

  • Occupation specific clothing - such as a chef's uniform, that allow the public to easily identify your occupation.
  • Protective clothing - that you wear to protect yourself from the risk of illness or injury posed by your income-earning activities or your work environment. These items include fire-resistant and sun-protective clothing, hi-viz wear, specialised nurses shoes, steel-capped boots, gloves, heavy duty trousers (not jeans or shorts) and overalls/smocks/aprons.
  • Compulsory Uniforms - that identify you as an employee of a specific organisation, by way of a logo.

You can claim your actual cost of dry-cleaning work-related clothing. You must have written evidence to substantiate your claim if your total claim for work-related expenses exceeds $300, excluding car and travel claims. 

Travel expenses

You can generally claim expenses for a work-related trip that includes an overnight stay. These expenses include meals, accommodation, flights, bus, train or taxi fares, hire car, fuel costs for a borrowed car. Note: You may have to reduce your claim by any portion of your expenses that was for private use or reimbursed by your employer. You can also claim parking fees and tolls at this section, but only in that they related to approved travel movement. If you are a long-distance truck driver, your meal expenses will be claimed here.

You need to keep receipts, or other written evidence for your travel expenses. There are some exceptions for expenses on accommodation,
meals and incidental expenses if you receive an allowance. If you travel away from home for six or more nights in a row, you need to keep travel records – such as a travel diary. This is in addition to keeping receipts for your expenses. This diary needs to record where you were, what you were doing and the times work-related activity started and ended.

Mobile phone and internet expenses

You may be able to claim the work related usage of your phone and internet costs that were not reimbursed or provided by your employer. To make a claim here of more than $50, keep a record of work calls and/or internet usage for 30 consecutive days in a diary, that is representative of your usage in the financial year. You should make sure that your employer requires you to use your own phone or internet in order to do your job.
You can only claim a deduction for the portion of your phone use when you're earning assessable income and your employer requires you to use your phone directly in earning that income.

If your work use is incidental and you are not claiming a deduction of more than $50 in total, you may make a claim based on the following, without having to analyse your bills:

  • $0.25 for work calls made from your landline
  • $0.75 for work calls made from your mobile
  • $0.10 for text messages sent from your mobile.

Monthly cost

Enter your monthly bill cost

Number of months

Enter number of months you worked in the last financial year

Work related percentage

Enter the work related % usage.

Home office expenses

"This calculator allows you to claim the home office expenses using the fixed rate method of $0.52 cents per hour. This rate covers the running expenses you incur for decline in value of home office furniture and furnishings (eg. a desk), heating, cooling, lighting and repairs to your home office equipment, furniture and furnishings. You still can claim the work-related cost of stationery, phone and internet expenses when using this $0.52 method. This method normally gives you a higher deduction.
Please note that the new Covid rate of $0.80 cents per hour can only be claimed if you worked from home from 01/03/2020 to 30/06/2020, the 2020/21 tax year and the 2021/22 tax years. This $0.80 cents rate will cover all your costs of working from home and you cannot claim for anything else. This means you will not be able to claim the stationery, phone and internet expenses separately as you could with the $0.52 method, thus this new Covid rate normally gives you a lower deduction. If you still want to use this Covid rate, you will need to calculate the home office deduction manually and enter it under the ""Other work-related expenses"" section on the top of this page"

Depreciation

A depreciating asset is an asset with a limited effective life and can be expected to decline in value over its useful life. The effective life is how long it can be used to be beneficial for the purpose of producing income. A depreciating asset begins to depreciate the first time you use the item or when you install it. 

There are two methods to use in order to work out the decline in value of an asset. You can choose one of the following methods:

  • The diminishing value method assumes that the decline in value each year is a constant proportion of the remaining value and progresses at a smaller decline over time.
    • formula = base value x (days held/365) x (200%/asset’s effective life)"
  • The prime cost method assumes that the value of a depreciating asset decreases consistently over time.
    • formula = cost of asset x (days held/365) x (100%/asset’s effective life)

NOTE: You can claim an immediate deduction if the asset costs $300 or less.

What is OWDV and CWDV?

Opening written down value (OWDV) applies to items that have already been claimed for depreciation on a prior year tax return. OWDV equals the original cost or value of an item minus the amount of prior depreciation.
The closing written down value (CWDV) is the depreciated value of an asset at the end of the current tax year. OWDV - Depreciation = CWDV. The CWDV of the current year is equal to the OWDV on next year's return.

Other work-related expenses

To claim a deduction for a work-related expense it must be directly related to earning your income, you must have a record to of proof (usually a receipt) and you must have spent the money yourself and not been reimbursed.
You should only enter here those items that cost $300 or less. Items priced higher than $300 be reported as depreciating assets and should be recorded in the Depreciation of Work Related Items section. If you used an item for both work and private purposes you must apportion your claim accordingly. Expenses that relate to you earning an income can include:

  • Books, periodicals and digital information
  • Cash shortages or client bad debts
  • Claiming mobile phone, internet and home phone expenses
  • Election expenses
  • Glasses, contact lenses and protective glasses
  • Income protection insurance
  • Overtime meals (if allowance was received and money was spent accordingly)
  • Protective items, equipment and products
  • Project pool deductions
  • Seminars, conferences and education workshops
  • Union fees, subscriptions to associations and bargaining agents fees
  • Working with children checks
  • Home office expenses – for employees working from home as a result of COVID-19, we have specific information available about home office expenses
  • Tools, equipment and other assets

Other deductible expenses

You may be able to deduct other expenses, such as the following:

  • election expenses
  • foreign exchange losses
  • foreign UPP amount
  • Australian film Incentive
  • low value pool deductions
  • income protection, sickness and accident insurance premiums
  • debt deductions
  • personal superannuation contributions
  • RSA contributions
  • assets still unclaimed before ceasing business
  • net personal services income loss of a personal services entity that related to your personal services income
  • certain deductible capital expenditure not claimed in full before ceasing a business
  • interest incurred on a loan used to invest under the infrastructure borrowings scheme if you intend to claim a tax offset
  • self education expenses you incurred in doing a course to satisfy the study requirements of a bonded scholarship

Self-education expenses

"You can claim the cost of self-education as a work-related tax deduction if there is a nexus between your studies and your income-earning activities. You may be eligible if:

* you are upgrading skills or knowledge specific to your work
* you are bringing your qualifications up to date
* your studies are related to your employment as a trainee
* your studies led to an increase in income from your work

You can also claim a deduction for self-education expenses if the course helps you satisfy study requirements to maintain your right to tax bonded scholarship.
Note that certain otherwise deductible items, such as course fees and textbooks, will require a deduction in your allowable self-education expenses by $250. We may be able to offset this $250 requirement using other types of expenses such as the cost of childcare or the purchase of a computer. "

Eligible self-education expenses

You can generally claim the following expenses:

  • accommodation and meals (if away from home overnight)
  • computer consumables such as ink or toner cartridges, printer paper, storage disks, etc
  • course fees
  • decline in value of depreciating assets such as laptops, etc (cost exceeds $300)
  • purchase of equipment or technical instruments costing less than $300
  • equipment repairs
  • transportation fares
  • home office running costs
  • interest
  • internet usage (excluding connection fees)
  • parking fees (only for work-related claims)
  • phone calls
  • postage
  • stationery
  • student union fees
  • student services and amenities fees
  • textbooks
  • trade, professional, or academic journals
  • travel to-and-from place of education

Note that you cannot claim the repayment of any of your Higher Education Loan Program (HELP) loans or your repayments to the Student Financial Supplement Scheme (SFSS) as a tax deduction.

Gifts or donations

The following qualify as deductible gifts or donations:

  • Gifts of $2 or more that you made voluntarily to an approved organization
  • A contribution of $2 or more to a registered political party, an independent candidate in an election for parliament, or an independent member of parliament.
  • An approved cultural bequest
  • An entry into a conservation covenant
  • A donation to a fund established by a trust instrument such as a private ancillary fund.
  • A donation to an approved organisation of shares valued at no more than $5000 listed on an approved stock exchange

You can't claim gifts or donations that provide you with a personal benefit, such as:

  • Raffle or art union tickets
  • Items such as chocolates or toys that have an advertised price
  • The cost of attending fundraising dinners, even if the cost exceeds the value of the dinner. You may be eligible to claim a deduction as a contribution if the cost of the event was more than the minor benefit supplied as part of the event
  • Membership fees
  • Payments to school building funds made in return for a benefit or advantage – for example, as an alternative to an increase in school fees or placement on a waiting list
  • Payments where you have an understanding with the recipient that the payments will be used to provide a benefit to you
  • Gifts to family and friends, regardless of the reason
  • Donations made under a salary sacrifice arrangement
  • Donations made under a will.
  • Donations made to social media or crowdfunding platforms unless they are a registered DGR."

Debt deduction

Debt deductions include expenses incurred in earning assessable income other than interest or dividend income.A 'debt deduction' is, broadly, an expense incurred in obtaining or maintaining a loan or other form of debt finance. Examples include interest, establishment fees, legal costs for preparing loan documents and fees charged by lending institutions for drawing on a loan facility.

Project Pool

If you allocated capital to a project pool you may be able to deduct this expenditure provided you:

  • operated this project during the tax year for a taxable purpose
  • carried on, or proposed to carry on, for a taxable purpose a project which was abandoned, sold or otherwise disposed of during the tax year, before or after it started to operate.

You cannot claim this deduction for:

  • a private or domestic expenditure such as the cost of constructing a driveway at your home, or
  • capital expenditure directly connected with a project undertaken in carrying on a business.

For the purpose of this deduction, a taxable purpose is the purpose of producing assessable income, the purpose of exploration or prospecting, the purpose of mining site rehabilitation or environmental protection activities.

Election expenses

You may be able to claim a deduction towards the costs of contesting an election at the local, territory, state or federal level of government if you were a candidate. Note that your deduction cannot exceed $1000 if you were running for a local election.

Foreign exchange losses

If you are an Australian resident who has resided and was employed overseas, or a temporary resident of Australia for income tax purposes, you may hold offshore accounts.

Gains and losses from such accounts, based on any deposits or withdrawals you may have made and in reference to changes in the value of the Australian dollar, are subject to specific foreign exchange (Forex) gains and losses rules.

You should know for the purposes of your tax return, that your foreign exchange losses are typically claimable as tax deductions. However, given the complexity of the Forex rules we advise that you reach out to one of our tax agents to discuss your tax situation before entering your information.

Income protection insurance

If you have purchased insurance against the loss of your income during the financial year, you may claim the cost of premiums as a tax deduction. Note that this deduction is only applicable towards income protection. You cannot claim a deduction insurance premiums that you paid to protect you against physical injury, even if such an injury would have caused you to lose your income.
Note: an income protection insurance policy taken out through your super, or whose premiums are directly deducted from your super contributions, also cannot be claimed as a deduction.

Low value pool

To create a low-value pool you must choose to allocate a low-cost, depreciating asset with a value of less than $1000 to the pool. Examples of such low-value assets are laptops, mobile phones, calculators, briefcases, etc that were not paid for or reimbursed by your employer.
To create the pool, you first need to estimate the percentage of the items effective life will be used to produce income as an employee. This estimate is known as the asset’s taxable use percentage.
It is this taxable use percentage of the cost or opening adjustable value that is written off through the low-value pool.
Your deduction total is typically only 18.75% of your taxable use percentage amount.

Personal superannuation contributions

You may be able to claim a deduction for personal superannuation contributions that you made to your superannuation fund or RSA provider from your after-tax income, for example, from your bank account directly to your superannuation fund.

You cannot claim a deduction for superannuation contributions paid by your employer directly to your superannuation fund or RSA provider from your before-tax income such as: the compulsory superannuation guarantee, salary sacrifice amounts or reportable employer superannuation contributions shown on your annual payment summary.

Before you can claim a deduction for your personal after-tax superannuation contributions, you must have: given your superannuation fund or RSA provider a notice of intent to claim or vary a deduction for personal super contributions, and received an acknowledgement from your superannuation fund or RSA provider. 

Foreign UPP amount

If you received income from a foreign pension or annuity, you may be able to claim a deduction provided the pension has an un-deducted purchase price (UPP). The UPP is the amount you contributed towards the purchase price of your pension.

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