It goes without saying that most Australians don’t like to think about tax. There is a collective groan across the country at 1 July when it’s time to go through your receipts and lodge your claim. The fact is, most people pay too much tax. The reasons are a mix of laziness, boredom and ignorance. Luckily, we can help with all three.
Laziness – leave it to us. Hand us over your paperwork and we’ll get you though. Grab a cup of coffee, answer any questions we throw your way and sign off your return. We’ll lodge your tax return for you and off you go back into your lives with barely a hiccup to your daily routine.
Boredom – We get it. Tax law is boring. It’s also complex. Luckily, we have the brains for that and can breakdown legalese into easily understandable words. We’ll even help you save tax for the next financial year and set you up for more tax saving goals.
Ignorance – if there’s one thing we know, it’s tax deductions and how to save your money by claiming them. If you don’t know everything you can claim, there’s no need to worry because we do.
To understand which expenses may be eligible for tax deductions, consider the following factors:
- Direct Relationship: Was the expense directly related to your work or income-generating activity?
- Personal Payment: Did you personally incur the expense without reimbursement from your employer?
- Documentation: Do you have an official record of the expense, such as a receipt or bank statement?
Pro Tax Tip: If you have both a mixed private and business expense, such as that yacht trip you went on that was both a delicious lunch and client meeting, you can apportion the business percent and claim that amount.
So, let’s take a look at some of the tax deductions you can claim to minimize your tax bill. After all, why pay more tax than you have to?
Working From Home
Working from home has become a common reality for many of us during the ongoing coronavirus crisis. Many of us still coordinate between a work desk and a home desk. The good news is that there are potential tax deductions available for various home office expenses you may have incurred. Let’s explore some of these deductible items:
Phone and Internet Expenses: If you’ve been using your personal phone and internet for work-related purposes, you may be able to claim a portion of these expenses.
Computer Consumables and Stationery: Expenses for items like printer paper, ink, pens, and other office supplies can potentially be claimed as deductions.
Home Office Equipment: If you’ve purchased computers, phones, printers, or furniture specifically for your home office, you might be eligible to claim either the full cost of items under $300 or the depreciation (decline in value) for items over $300.
Pro Tax Tip: Certain home expenses, such as mortgage interest, rent, rates, and general household items like coffee or tea, are typically not claimable unless you run your own small business from home which clients are able to attend regularly.
There have been changes to the way you can claim your Working From Home (WFH) expenses.
Starting this income year, you have two methods available to calculate your working from home deductions: the revised fixed rate method and the actual cost method. The rules for claiming using the actual cost method remain the same, but if you’re considering the fixed rate method, here are the updates you need to know.
Revised Fixed Rate Method:
Firstly, the hourly rate for claiming tax deductions on expenses has been increased from 52 cents to 67 cents per hour worked from home. This means a higher deduction to help cover the various expenses incurred while working remotely.
Another significant change is that you no longer need a dedicated home office space to claim expenses. Whether you have a specific area solely for work or not, you can still claim eligible expenses.
Moreover, the revised method now covers a wider range of expenses. You can claim deductions to cover electricity, gas, phone and internet usage, computer consumables, and stationery as a flat 67 cents per hour instead of claiming the items separately. Additionally, you have the opportunity to separately claim the work-related portion of the depreciation of assets like office furniture and technology.
Pro Tax Tip: You’ll need a 4 week representative diary for the period 1 July 2022 to 28 February 2023 a dedicated log book or diary record detailing every hour you’ve worked from 1 March 2023. In addition, you will need at least one bill from the utility you’re claiming.
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Travel Expenses
If you travel and stay away from your home overnight while performing your employment duties, you may be able to claim a deduction for travel expenses like accommodation, meals, and incidental expenses.
You can only claim these expenses if you actually stay away from your home overnight. If your work-related travel doesn’t involve an overnight stay, then you won’t be able to claim these expenses.
To determine if you qualify for travel deductions, consider the following criteria:
Your regular place of work remains unchanged. This refers to the usual or normal place where you start and finish your work duties for your employer.
You’re away from home for short periods of time. This means you’re not embarking on extended trips but rather staying away for relatively brief periods.
You stay in short-term accommodation such as hotels. If you’re lodging in places like hotels while on your work-related trips, it is considered overnight travel.
For instance, let’s say you need to travel interstate for a few days to meet with clients. In this scenario, you would be eligible to claim travel expenses since you’re both traveling and staying overnight for work.
It’s worth mentioning that when an employee travels away from home overnight for work, they usually can’t be accompanied by family or have family or friends visit them during that time. So, no claiming the kids.
On the other hand, there are situations where you won’t be eligible for overnight travel deductions. This includes cases where:
- Your personal circumstances result in living a significant distance from your workplace.
- You’re already living at the location where you’re working, eliminating the need for overnight stays.
- You choose to sleep at or near your workplace instead of returning home, but this choice doesn’t qualify for travel deductions.
Read: What The ATO Has In It’s Sights This Tax Time 2023
Clothing and Laundry Expenses
Let’s talk about claiming expenses for occupation-specific clothing. If you need to buy or clean clothing that clearly distinguishes you as being associated with a particular occupation, you may be able to claim the costs.
Occupation-specific clothing refers to outfits that are specifically designed for a certain job and make it evident that you belong to that profession. Examples include a chef’s chequered pants or a judge’s robe. If you have expenses related to purchasing or cleaning these types of clothes, you can potentially claim them as deductions.
However, you can’t claim expenses for clothes that are not directly related to your occupation; can be worn in various professions, or are considered everyday attire. For instance, you cannot claim deductions for a bartender’s black trousers and white shirt, a standard business suit, or a swimming instructor’s swimwear since these items are not occupation-specific.
To be eligible for a claim, the clothing should serve the purpose of identifying you distinctly as a person associated with your specific occupation. It should not be clothes that you would wear outside of work or that could be worn in multiple professional settings.
You can claim the cost for repair and maintenance of your work clothing, which includes $1 per load if you’re only washing work clothes, or 50 cents each load if the clothes are mixed with conventional clothing. Everything adds up and no detail is too small when it comes to claiming your money back from the ATO.
Self-Education
Look at you, getting all educated and stuff. The good news is if you’ve hit the books for your job, you can claim the expense.
To determine if an expense is eligible, you need to consider if it either maintains or improves the specific skills or knowledge required for your job, or if it is likely to result in an increase in your income from your employment activities.
The skills and knowledge you gain through self-education should directly relate to your job and help you excel in your field. It could be attending courses, workshops, or training programs that enhance your expertise and keep you up-to-date with industry advancements.
Your self-education expenses must have a sufficient connection to your employment activities. Your employment activities refer to the duties and tasks expected of you to perform your job, which are usually outlined in your duty statement or job description.
Pro Tax Tip: You can claim more than tuition fees. Parking, laptops, tools, electricity, internet and stationery are also claimable items. Just make sure you’re the one out of pocket and not your employer.
We’ve only just touched the tip of the iceberg when it comes to tax deductions. Like the Titanic, there’s more below the surface, and most deductions come down to your personal situation. That’s what makes them so tricky. It pays to hire a professional to help you out, and like any other work expense, a tax agent’s fees are also tax deductible. So, if you want to take the plunge, call us on 1800 367 487 and book your appointment today!