Deductions

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When completing your tax return, you’re entitled to claim deductions for some expenses, most of which should be directly related to earning your income (called “work related expenses”). Naturally, a deduction reduces your taxable income, and means you pay less tax.

To claim a deduction for work-related expenses:

  • you must have spent the money yourself and not been reimbursed

  • it must be directly related to earning your assessable income

  • you should have a record to substantiate your claim. When your expenses meet these criteria, here’s a list of the things you may be able to claim.

  • Vehicle and travel expenses: This does not normally include the cost of travel between work and home, but if you use your car for work or work in different locations then you may be able to claim a deduction.

  • Clothing, laundry and dry-cleaning expenses: To legitimately claim the cost of a uniform, it needs be unique and distinctive. This year, face masks and gloves for COVID-19 protection may be deductible, but only if related to earning income.

  • Gifts and donations: Only claim for contributions to organisations that are endorsed by the ATO as “deductible gift recipients”.

  • Home office expenses: Costs could include your computer, phone or other electronic device and running costs such as an internet service. There may be scope for depreciation, and you can only claim the proportion of expenses that relate to work, not private use. There is also an alternative “80 cents per hour” method that can be used for claiming expenses if you worked from home during the COVID-19 lockdown (only from 1 March).

  • Interest, dividend and other investment income deductions: Examples include interest, account fees, investing magazines and subscriptions, internet access, depreciation on your computer.

  • Self-education expenses: Providing the study relates to your current job, you may be able to claim expenses like course fees, student union fees, textbooks, stationery, internet, home office expenses, professional journals and some travel.

  • Tools and other equipment: If you buy tools or equipment to help earn your income, you can claim a deduction for some or all of the cost. The type of deduction you claim depends on the cost of the asset. For items that don’t form part of a set and cost $300 or less, or form part of a set that together cost $300 or less, you can claim an immediate deduction for their cost. For items that cost more than $300, or that form part of a set that together cost more than $300, you can claim a deduction for their decline in value.

  • Other deductions: Other items you can claim include union fees, the cost of managing your tax affairs, income protection insurance (but not if it’s through your super fund), overtime meals, personal super contributions (that is, after tax) and other expenses incurred in the course of earning an income.

    Of course, check with this office for more ideas. Sometimes one’s circumstances will define what can and generally cannot be claimed as a deduction, so even if some of the above seem to fit your situation, it may pay to check with us first.

TAXRhondel Clarktax