Common myths about work expense tax deductions in Australia

It’s a creative world out there, and there’s a time and a place to explore your creativity. Paint a picture. Enrol in a pottery class. Take a dance class, but the Australian Taxation Office (ATO) draws the line at creative writing tax claims. 

What are the most common tax deduction myths?

Myth: Certain claims are just ‘automatic’. The ATO lets everyone claim $150 for clothing and laundry, 5000 km under the cents per kilometre method for car expenses, or $300 for work-related expenses, even if they didn’t spend the money. It’s a given.

Fact: The ATO doesn’t have ‘automatic’ or ‘standard deductions’. While you don’t need receipts for $300 for work-related expenses, $150 for laundry expenses (this is for laundry expenses only and does not include the clothing expenses) or if you are claiming 5,000 km or less for car expenses under the cents per kilometre method, the actual expense must have been incurred and you must be able to explain how you incurred the expense and how it relates to your income.

Myth:  I can just use my bank or credit card statement, I don’t need a receipt.

Fact: The ATO requires certain facts to show what you spent your money on, how you spent it and who your supplier was. Your receipt will show the relevant information they need to see, while bank statement alone might not contain all of the information required. You don’t need to contain drawers filled with paper. You can keep electronic receipts if it is a true and clear representation of the original.

Myths about work tax deductions

Myth: Sunscreen in makeup? Claimable – because I work outside!

Fact: Sunscreen in cosmetics does not make it tax deductible. The percentage of sunscreen in the product rarely has a high enough rating for it to be considered tax deductible. Cosmetics, even if they do contain a sunscreen element, are considered a personal expense.

Myth: I need to be fit for work so I can claim my gym membership.

Fact: There are no occupations where gym memberships are allowed. Some occupations are allowed however, to claim gym classes paid on a pay as you go basis. To be eligible, you would need to work in the Australian Defence Force as a special operations personnel or have a job that requires a very high level of physical fitness for which you are regularly tested to remain employed in that role. This would also include Police who are dog handlers and are required to keep up with their dogs. Keeping fit otherwise is considered a personal expense in the eyes of the ATO.

MythI went on a conference while on holiday – now I can claim my travel expenses. Bonus!

Fact: If you’re on a holiday and then decide to add a conference, or add a holiday on to your work trip, only the work-related expenses can be claimed. Your private holiday is just that – private.

READ: What Is A Tax File Number?

Myth: My boss told me to wear a certain colour to work – now I can claim them as a work-related expense.

Fact: You’ll only be able to claim clothing as a work-related claim if they are a distinct uniform with a logo that you need for your job, or protective clothing you need to wear to do your job and you haven’t been reimbursed by your employer. Plain clothes, like black pants, are not deductible even if your employer told you to wear them.

Myth: I need to keep up to date for work, therefore I can claim my television subscription.

Fact: Essentially, any television subscription is private. Keeping up to date on your television usually will not provide a sufficiently close connection with your employment.

Myth:  I can claim my travel expenses getting to work from home.

Fact: Travelling to your job from home is considered a private expense and cannot be claimed.

Myth: I have a cap on my internet and phone plan, so I can claim the full amount as a work-related expense.

Fact: You’ll need to apportion your work and private use. The ATO will only allow you to claim the work-related part of those expenses.

Three golden rules

The ATO has three golden rules when it comes to deducting claims:

  1. You must have already incurred the expense – if you haven’t spent it, you can’t claim it
  1. The expense must be work-related – anything of a personal nature or expense can’t be claimed against your job. It remains a personal expense
  1. You must be able to prove your claim – keep your receipts! The ATO can ask to see your proof for up to five years after the expense has been claimed.

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Every occupation has a different range of tax deductions. Speak to a tax professional to work out what tax claims you can make. There might be a few you didn’t know about.

Did you know you can claim your tax agent’s fee as an expense? Not only will they get you a better return, but their charges are also tax deductible.

ITP The Income Tax Professionals have been helping Australian individuals and businesses with their personal and business tax for 50 years. If you’re a client of ITP, you can speak with your professional during the year and seek their advice for free! Speak to a Professional today.