Get your receipts ready! While some people delight in the quest to claim every possible deduction at tax time, others are confused and may not be claiming everything they’re entitled to. Here’s what you need to know
First and foremost: be able to back your claims
The Australian Government’s MoneySmart website says that any expense you want to claim must be:
- Real: You actually spent the money and you haven’t already been reimbursed.
- Relevant: The expense must be closely related to your job.
- Recorded: Whether it’s a shoebox full of paper or digital records, you must be able to prove both your purchase and in some cases your activity (travel, use of equipment).
Yes, the tax office is paying attention
In 2017, the ATO has warned they’ll be on the lookout for incorrect claims. Assistant Commissioner Kath Anderson said the ATO would use real-time data to compare taxpayers with others in similar occupations and income brackets, to identify higher-than-expected claims.
There are rules around deductions that people don’t always take the time to understand. For example, Ms Anderson said that deductions for work uniforms are a common trap for employees at tax time.
“It’s a myth that you can claim everyday clothes, for example, black pants and a plain white shirt, even if you only wear them to work, and your employer says you have to,” she said. “To legitimately claim your uniform, it needs be unique and distinctive, such as a uniform with your employer’s logo, or be specific to your occupation and not for everyday use, like chef’s pants or coloured safety vests.”
Other deductions you (probably) can’t claim
- Car expenses for transporting tools and equipment, unless your employer requires you use them and they cannot be left at your workplace.
- Car expenses that have been salary sacrificed.
- Higher education contributions charged through the HELP scheme.
- Self-education expenses that prepare you for a future, dream job.
- Private use in terms of: travel to work; phone; and internet.
- Up-front deductions for equipment that cost more than $300. However, you can spread your deduction claim over a number of years (this is called depreciation).
Deductions you can claim
Some common work-related expenses you can claim include:
- Transport costs for work that fall outside your usual travel between home and work: For instance, travelling between two separate workplaces or sites.
- Clothing, laundry and dry-cleaning: Only for occupation-specific clothing. You can claim your personal laundry expenses for cleaning eligible clothes ($1 per load for a full load of work clothes).
- Gifts and donations: When you donate $2 or more to registered charities and organisations.
- Home office expenses: Such as computers, work-related phone calls, phone rental, and the costs of running your office (only the portion that reflects the work-related use).
- Interest, dividend and other investment income deductions: Claim ongoing management fees, and personal expenses incurred in managing investments like travel and internet costs.
- Self-education expenses: Where the course you’re studying leads to a qualification that’s likely to improve your current job skills or prospects, you can claim a wide range of costs like repairs, stationery, and textbooks.
- Tools, equipment and other assets: Items $300 and less can be deducted immediately. Claim only the portion equivalent to work use, if it’s also used for private purposes.
Before submitting your tax, it pays to carefully read the ATO’s advice on deductions. Planning ahead for 2018, the ATO app (available to download in iOS and Android) includes features that help you track all of your expenses throughout the year, and even pre-fills your tax return.
Take the time to discover what you can and can’t claim on your taxes in 2017 to make sure you get the reimbursements you deserve while avoiding errors that could cause delays or penalties.