Australian taxpayers take great pride in being creative in claiming tax deductions to beat the taxman, but under our Self-Assessment Tax System it is the taxpayer who will be penalised when claiming incorrect tax deductions.

Taxpayers can claim ‘anything within reason’ in their tax return and the refund will be issued, but if the claims are found to be incorrect, the taxpayer will be required to repay the tax avoided, plus pay interest on incorrect claims of about 9% per annum.  If the ATO believes that the taxpayer has acted carelessly, a penalty between 25% and 95% of the tax avoided may also be charged.

H&R Block has produced this guide to help taxpayers only claim what they are entitled to, and to get their tax returns correct, before they lodge them. We’ve also pulled together a few FAQ’s based on real-life client situations to help taxpayers get it right.

Declare all your income

The ATO now receives details of your income information electronically from most institutions that pay interest and dividends, foreign income from overseas tax offices, payment summaries from employers and pension payments.

This information is used to match income declared in tax returns. If the income declared is not the same as the income matched, the ATO will write to you seeking an explanation.

If it is found that you have under declared your income, the ATO will issue an amended assessment and will charge interest of about 9% on any underpaid tax. In addition, the Tax Office will typically impose a 25% culpability penalty for “failing to take reasonable care’. Do it again the penalty can add up to 50% of the tax avoided.

Be careful with self-education deductions

You need to be sure that the education undertaken has the necessary connection to the income you are currently earning, otherwise the deduction is not allowable. You can’t claim a self-education deduction if you are undertaking a course to open up a new line of employment. Read more about claiming self-education deductions.

Get your Home Office claim right

You are not entitled to claim a percentage of rent or the interest on a mortgage if you are using your home as a home office to do work at home after hours. You can either claim a deduction for home office based on actual costs or you can claim a set rate per hour (currently 45 cents) to cover running costs such as heating, electricity, furniture, carpets etc. Find out more about claiming home office expenses.

Car expenses

You need to have the necessary records to substantiate your claim:

  • log book, receipts and invoices if you use the logbook method
  • actual record of kilometres travelled (diary or similar records) if you are claiming the per kilometre method

Read more about claiming car expenses

Need help?

If you have any questions or would like help with your tax return, use our office locator to find your local H&R Block office and book an appointment online.

 

Tax Frequently Asked Questions

Can I claim tax deductions for items that I use part for work and part personally?

Yes, but you are only entitled to claim that part of the expense that directly relates to your job.

Can I claim for my mobile phone/home phone and laptop?

Yes, if you use them for work and your employer doesn’t reimburse you. You will need to keep a log of the calls over a four week period so you can pick up the costs from your itemised bill and calculate a work percentage to apply over the whole year.

I work in a fashion shop and my employer requires me to buy and wear clothes from the shop whilst working, therefore can I claim these costs?

There is no claim as the clothes are of a conventional nature.

I work as an employed chef and I go to a different restaurant each week to see what our competitors do.  Can I claim these costs?

This claim is not allowable as the expense is of a private and domestic nature since there is a tenuous relationship between the expense and the current income.

I work in a bottle shop and I purchase products so I can talk to the customers who ask questions on various products. Can I claim these costs?

This claim is not allowable as the expense is of a private and domestic nature since there is a tenuous relationship between the expense and the current income.

I do some work at home in my home office; it is 20% of the area of the house so can I claim 20% of the rent or mortgage?

The rules specifically exclude such a claim, the home office deduction rules limit claims to the outgoings in relation to the home office, heating, electricity and depreciable costs of desks, computers, carpets, chairs, filing cabinets and bookshelves.

I work for a travel agent, and during my holidays I travel to various tourist sites that I discuss with clients at work. Can I claim these costs?

This claim is not allowable as the expense is of a private or domestic nature. There is a tenuous relationship between the expense and the current income.

I work as a retail pharmacy assistant part time, whilst studying full-time for my Pharmacists degree. Can I claim my education costs?

This claim is not allowable as the education is designed to open up a new field of employment and does not relate to the current income earning activities

I work in the advertising industry and as our clients advertise on Pay TV, can I claim my subscription costs in my tax return?

This claim is not allowable as the expense is of a private or domestic nature. There is a tenuous relationship between the expense and the earning of your income.

I live in the country, without public transport, so can I claim the costs of parking my car in a car park near work?

The costs of driving and parking to get to work are a private expense and are not deductible.

My only income is from salary and wages. I made a personal superannuation contribution to my superfund. Can I claim that amount as a deduction on my tax return?

This claim is not currently allowable as you don’t meet the ATO 10% rule. This means that in order to claim the deduction, your salary and wages income cannot be greater than 10% of your total assessable income.  There is a government proposal to allow such contributions to be deductible but this will not apply until 1 July 2017.

I was provided a company car. I need to wash the car regularly before going to see the clients. Can I claim the car wash expenses on my tax return?

The claim is not allowable as the expense is of a private and domestic nature.

I am an actor. Can I claim the costs of tickets to go to the cinema and theatre?

This claim is not allowable as the expense is of a private or domestic nature. There is a tenuous relationship between the expense and the current income.

I bought a $50 raffle ticket. Can I claim it as a donation on my tax return?

This claim is not allowable as it is not truly a gift since it provides a benefit (the possibility of a prize) for you. You can only make tax deductible donations to organisations that have the status of deductible gift recipients (DGRs). The receipt (in your name) must also be kept if the donation is more than $2.

September 2016

 

Book a tax return appointment

With over 440 offices staffed by over 2000 experienced tax accounting professionals, our tax accountants have the knowledge to walk you through the tax refund process with ease. We are committed to offering expert and personal service year-round at a location convenient to you. Find an office and book an appointment online.

Book now

Book a tax return appointment

With over 440 offices staffed by over 2000 experienced tax accounting professionals, our tax accountants have the knowledge to walk you through the tax refund process with ease. We are committed to offering expert and personal service year-round at a location convenient to you. Find an office and book an appointment online.

Book now