Come tax time, many Australian’s hear a lot about what can and can’t be claimed. While some ‘advice’ can seem bizarre, hilarious and down-right incorrect, we’re here to straighten out some answers to the most common questions we see all the time.
Pro Tax Tip: Not all expenses are tax deductible. The correct records need to be kept to be able to substantiate your claim. You’ll need to determine if an expense is deductible against your employment income, how to apportion expenses between private and business and how to work out if you can claim an immediate deduction or if you’ll need to depreciate your expense over a number of years.
Here are some common myths about work expense deductions
Myth: Everyone can automatically 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.
Fact: There are no ‘automatic’ or ‘standard’ deductions. A small amount of expenses can be claimed without the need for receipts under certain circumstances, however you still need to show how you worked out your claim. This can be through log books and work diaries. You must have spent the money related to earning your income and you must be able to explain how you calculated the claim.
Myth: I don’t need a receipt; I can just use my bank or credit card statement.
Fact: To be able to claim a tax deduction, your proof must show how you spent the money, what you spent it on, who the supplier was and when you paid. Some statements don’t have this information. You’ll need these details if substantiation is required.
Myth: I can claim makeup that contains sunscreen if I work outside.
Fact: Cosmetics and sun protection are not tax deductible even if you’re required to look certain way for work. If you’re work required you to be out in the sun, you may claim sun protection, including sunscreen that is a high SPF rating, hats, UV sunglasses and other forms of sun protection.
Myth: I can claim my gym membership because I need to be fit for work.
Fact: People like to keep fit and a certain fitness level might be required for your job, but unless your work requires an extreme level of fitness such as special operation personnel in the Australian Defence Force, you can’t claim gym memberships or fitness equipment. You’ll also need to be tested regularly to assess your level of intense fitness in order to retain your employment.
Myth: I can claim all my travel expenses if I add a conference or a few days’ work to my holiday.
Fact: If you add personal time to a work holiday, you’ll need to apportion costs between business and private expenses and only claim the business-related expense.
Myth: I can claim my work clothes because my boss told me to wear a certain colour.
Fact: Only clothing that is a uniform or distinctly identifies you with your place of work or career can be claimed as a work-expense. The Australian Taxation Office (ATO) are very strict when it comes to claiming clothing. Black pants, white shirts and items that can be worn casually can’t be claimed, even if it’s a requirement to wear them for work.
Myth: I can claim my pay television subscription because I need to keep up to date for work.
Fact: A television subscription may not be claimable. Keeping up on current affairs and the news is not a specific enough requirement for employment. Subscriptions for job specific industry journals, magazines and newspapers are claimable.
Myth: I can claim home to work travel because I need to get to work to earn my income.
Fact: For most people, traveling from home to work is a private expense. There are only a narrow number of specific jobs that can claim this travel.
Myth: I’ve got a capped phone and internet plan, so I can claim both business and private phone calls and internet usage.
Fact: You’ll need to use your phone and internet for work use to be able to claim. Paying for phone and internet may not be an automatic deduction, even if you do apportion between private and business use.
Claiming Tax Deductions
In order for an expense to be an eligible work-related claim, you must satisfy several criteria:
- You must already have incurred the expense
- You must have incurred the expense as a part of earning your income
- The expenses can’t be a capital expense
- The expense can’t be private
- The expense must not relate to exempt income or non-assessable non-exempt income
- You must be able to prove your claim
When you claim an expense that is not 100% work-related, you’ll need to work out the business versus private use as a percentage of your cost. You might need further records to show how you worked out the percentage, such as a log book, work diary, electronic records of use or travel diary.
A work diary should be kept for four consecutive weeks and should show expenses such as home office items, mobile phone calls and internet hours. This four week period can then be averaged out for the year. If your usage fluctuates, you’ll need to keep further records.
A vehicle log book should be kept for 12 consecutive weeks per vehicle for each 5 year period and record the date, odometer reading for the start and end of your journey and the reason for your journey. You must keep all receipts relating to petrol, repairs and maintenance costs. If your usage fluctuates or dramatically changes, then you’ll need to start another log book.
Commonly Claimed Expenses
Some common expenses include:
- Accommodation when on a work trip
- Professional fees
- Practising certificates, memberships and accreditations
- Bags and cases for work
- Bank fees
- Books, periodicals and digital information services
- Car expenses
- Clothing and laundry
- Computers and software
- Conferences, seminars and training courses
- First aid courses
- Home office expenses
- Overtime meals (if receiving an overtime meal allowance)
- Phone and internet
- Protective items
- Self-education and study
- Tools and equipment
- Union and associated fees
- Tax agent fees
Pro Tax Tip: Some items that can be claimed will depend on your job or career. What may be claimed by one person, may not be claimed for another. Your tax agent will help you work out what can and can’t be claimed.
ITP Accounting Professionals know and understand exactly what each individual Australian can claim as a tax deduction. If you’re still not sure, call 1800 367 487 and chat with a friendly professional today. As a client of ITP, you’ll receive free tax advice throughout the year to help you maximise all of your tax deductions.