In 2019-Tax-Tips

If you have ever wondered what tax deductions Australians can claim, this post is for you!  We will discuss the most common types of deductions and how to work out your total taxable income.  

Tax law varies from state to state, so you should consult a professional accountant about your specific circumstances. However, some things are generally applicable across all states. This article will be focusing on those and some other general tips that may help save some money! 

Australia is a country that has many tax laws. However, some are more important than others. For example, you can claim deductions for your work uniform if it costs over $150.00 and the deduction amount is less than 10% of your annual income (before tax). 

This article will provide a simple guide to effectively calculating and claiming your Australian tax deductions. 

The most common type of deductions in Australia comes from our salaries at work or through investments such as shares and property ownership. 

You need to know about these types of deductions because they make up what’s known as “above-the-line” deductions because they reduce our taxable income before any other calculations occur.

If you’re an Australian resident and you make a profit from your business or investments, then there’s a good chance that you’ll need to file a tax return. If this is the case, then it would be wise to take advantage of all the deductions offered by the government. 

Australia offers many different types of deductions for taxpayers, depending on their circumstances. This guide will help explain what type of deduction may be available and how to claim them! 

What are some common deductions in Australia? What’s the difference between ‘standard deduction’ and ‘itemised deductions’? How can I calculate my taxable income? Which one do I choose? This article will answer these questions and more about Aussie tax deductions so that you don’t have to fret over them during tax season again!

Tax deductions are some of the most important things to know about as a citizen of Australia. This article will help you understand what they are and how to take advantage of them.  The taxpayer must be able to show that expenses were incurred for them to be deducted.

This means that if you have a professional photographer come out and take your family photos, those expenses can’t be deducted unless you can prove it with a receipt or contract from the photographer. 

There is also a limit on certain types of deductions, so make sure you don’t exceed them!  If you’re not sure whether an expense falls under one category or another, there’s always Google-a quick search that will tell you everything that needs to know!

Let’s get started!

Top 8 work-related claims the ATO is watching

1. Car expenses 

If the job doesn’t require commuting between multiple worksites, work-related car travel is generally considered to be private travel. This includes cases where the employee needs to make multiple trips between their home and workplace during the day.

2. Transport of bulky items 

Car expenses for transporting bulky items between home and work, such as tools and equipment, can only be claimed when there are no other options for transporting or securely storing them (such as if the items could have been stored securely by the person’s employer.)

3. Overseas travel 

The ATO used the example of a wine expert who claimed airfares, accommodation and other travel items as work-related expenses after visiting overseas wineries. The claim was rejected after his employer confirmed that the trip wasn’t work-related.

4. Meal expenses for travel 

A meal consumed on a work trip can only be claimed if the trip also requires an overnight stay.

5. Internet and mobile phone 

While most people know they can’t claim private mobile phone and internet use as a work expense, over-claiming can still occur if used partially for work purposes. Taxpayers can claim up to $50 in phone and internet expenses without keeping detailed records.

6. Clothing 

Employees can only claim for clothes that are part of a work uniform. Cleaning expenses can also be claimed, but written evidence (such as receipts and diary entries) must be provided if the claim exceeds $150.

7. Home office expenses 

This can include items such as a computer and a phone and various office running costs such as cleaning, lighting, and cooling. It does not cover occupancy costs such as rent or council rates.

8. Self-education 

This is deductible only when it leads to a formal qualification and is directly related to the taxpayer’s current job. It does not cover education aimed at acquiring a new job.

How To Claim Work-Related Phone Calls And Expenses

Common work-related mobile phone tax deductions include:

  • Phone calls
  • Video calls
  • Text messages
  • Emails
  • Logging in to systems
  • Software testing
  • Online research
  • Tracking

It’s not just work-related phone calls that cost you money when you use your personal mobile phone for work; it’s everything else too! That’s why it’s worth getting all of your eligible phone expenses back each year.

1. How to claim work-related phone calls and other phone expenses on your tax return

Claiming your phone expenses is not as simple as just uploading your monthly mobile phone bill and entering the total amount in your return. The ATO knows you also use your phone for private use. So how do you claim work-related phone expenses the right way?

To start, you can only claim the portion of your phone use that is work-related. You’ll need to work out what that percentage is, and you’ll need to keep records of those costs.

2. Can I include the cost of buying my phone in my phone expenses?

If you purchased a phone outright that you use partly for work, you could claim a percentage of the purchase price. If the phone was below $300, you could claim the business percentage of that amount as a one-off tax deduction

Or, if it was above $300, you claim the depreciation of the mobile phone over its lifespan, which the ATO states are two years from the date of purchase. (Don’t worry about calculating this yourself! One of our expert accountants can calculate it for you).

3. What are the ways to claim phone expenses on your tax return?

  • Calculate from a mobile phone plan.
  • Claim work-related calls only.
  • Claim costs from a bundled phone and internet plan.

1. How do I calculate my expenses from a mobile phone plan?

If you have a mobile phone plan, you can claim the work-related portion of your phone use. Here’s how to do it for both itemised and non-itemised bills.

Itemised bills

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Work out the amount to claim by:

  • For example, recording the number of work calls and the time spent on work calls.
  • Recording the amount of data downloaded for work purposes.

Example: Ann is on an $80 per month phone plan that includes unlimited calls and 15GB of data. Her bill itemises her phone calls and provides her with her monthly data use.

Ann checks her phone bill and works out that the work-related calls make up 20%. She also estimates her phone data use to be 20% as she often checks and responds to emails on her phone. Therefore, she calculates the following:

20% (business use) × $80 (total bill) × 11 months (she had 1 month leave) = $176. Therefore, she can claim $176 in phone expenses on her tax return.

Non itemised bills

If your bill is not itemised, you can keep a diary for one month of all of your phone expenses. A handy phone diary you can use here.

Example: David’s monthly phone bill is $50. Over a typical work month, David works out that 25% of his phone use is work-related (25 work calls ÷ 100 total calls). 

Then, after taking a month of leave across the year, David calculates 25% × $50 × 11 months = $138. Therefore, David can claim that amount as a phone expense on his tax return this year.

2. Just need to claim a few unexpected work-related calls?

If your claim is less than $50 in total, you calculate the expenses at a nominal rate:

  • $0.75 for work calls made from your mobile
  • $0.10 for text messages sent from your mobile.

For claims over $50, the easiest way to work out how to claim work-related mobile phone expenses is by the method we describe in item 1 above. First, choose a typical four-week period and record your work-related use. Then, apply that percentage to the whole year.

3. Need to calculate work-related costs from a phone and internet plan bundle?

It is common for households to have their phone and internet services bundled. If you need to claim expenses for work-related use of your phone and internet, you need to figure out your costs based on your work use for each. 

(Special note: If you share the cost of the bills with someone else in your household, you also need to apportion the amount you are claiming only to be “your share” of the bill, not the total amount).

Example: Carol lives by herself and has a $150 per month mobile phone and internet bundle. The bill shows that the monthly cost of the mobile phone service in her bundle is $65, and her internet service is $85.

Now that Carol has the value of each bundled component, she then calculates her work-related use for each item:

  • Carol’s mobile phone use: 20% work-related use × $65 per month × 11 months (as she had a month of leave) = $143
  • Home internet use: 50% work-related use × $85 per month × 11 months (as she had a month of leave) = $467.50

Carol claims a deduction of $610.50 for the financial year ($143 mobile phone use, plus $467.50 home internet use) in her tax return.

4. Does the Short Cut Method of claiming home office expenses affect my phone expenses claim?

The short answer is YES! It’s important to know that if you worked at home between 1 July 2020 to 30 June 2021 and used the Shortcut Method to claim your home office expenses, all your phone expenses are included in that 80c per hour claim. You cannot claim your work-related calls separately as well.

(Important note: The Shortcut Method usually leads to a lower deduction claim for taxpayers. Speak with your accountant, and he can assess your personal circumstances and let you know which home office method will put the most money in your pocket at tax time).

5. Need some help claiming your work-related phone expenses?

Claiming work-related calls and phone expenses can be confusing. But don’t worry! When you’re doing your tax return, just have a chat with one of your expert accountants; they’re always happy to help you work out the right amount to claim.

Work-related travel expenses – what can you claim?

1. What exactly is a work-related travel expense?

If you travel for work, any purchases you make related to that travel can likely be claimed as a travel expense on your tax return.

As with most work-related expenses, travel expenses are usually tax-deductible. But, of course, there are a few restrictions on what you can claim, and we’ll explain those a little later.

2. Work-related travel expenses can boost your tax refund!

The following travel-related expenses are tax-deductible if you are eligible to claim them (check eligibility rules further down):

  • Accommodation
  • Incidental expenses (laundry etc.)
  • Air, bus, train and taxi/rideshare fares
  • Bridge and road tolls
  • Parking fees
  • Car hire charges
  • Meals (if your travel included an overnight stay)
  • Bags used only for work travel

3. Can I claim driving in my car or public transport?

Transport costs are one of the most popular travel tax deductions. Generally, work-related travel in your car or on public transport is claimable except travel from home to work (and vice versa).

Allowable Claims

  • Travel between two different workplaces (or jobs).
  • Travel from your workplace to offsite meetings or events.
  • If you work from home for part of the day, then travel to your workplace for that same employer.
  • Travel from your home to an alternative workplace if required.
  • If you work at more than one location for the same employer, you can claim the cost of travelling between locations.

Travel expenses you can’t claim

  • The cost of travel from home to your everyday place of work (and back again).
  • If you run an errand on the way to or from work. E.g. pick up the mail or a package.
  • If you work overtime or out of hours.
  • When your home is your place of work for one job, and you travel to a different location to work for somebody else.

4. Is car parking a travel expense?

You can claim for work-related parking expenses as long as the trip you took was also allowable as a deduction (see list above).

For example, if you pay for parking to attend a company meeting or event and you use your own car to get there, you can claim the trip and the parking costs.

However, you can’t claim the cost of normal, everyday parking if you drive to work and pay for parking near your workplace.

Important: You can’t claim any car or parking expenses if your employer reimbursed you.

5. Do I need to keep a travel diary?

If you are away from home for more than six consecutive nights, you should keep a travel diary to record where you were, what you were doing, and your activities’ start and end times.

Example travel diary entries

Monday:

  • 6:00 am Flight to Sydney – arrive 8.30 am
  • 8.30 am – 9:00 am Uber from Sydney Airport to Darling Harbour
  • 9:30am – 4:00pm Trade Conference
  • Overnight at The Hyatt, Darling Harbour.

If you don’t have a travel diary handy, no problem! But, first, download a travel diary template.

It’s a good idea to record your travel and expenses, even when you aren’t required to keep a diary. It’s very easy to forget details about expenses months after they happen.

6. What if I receive a travel allowance?

If you receive a travel allowance from your employer, it is usually considered taxable income and is listed on your income statement. However, as long as you spent the money you were paid as an allowance, you can claim a tax deduction against it at tax time.

A common mistake is to assume that you can claim the entire allowance as a tax deduction. But, unfortunately, this isn’t necessarily the case.

You can only claim the total of your actual expenses. So, for example, if you received $1500 worth of travel allowances from your employer during the year, but your travel cost was $1,000, you can only claim $1,000 worth of travel deductions on your return.

Only claim travel deductions you have evidence for, as the ATO can require proof for any of your expenses.

7. What travel records should I keep?

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You should keep ALL travel expense records and receipts, even if you receive an allowance. It’ll help ensure you claim everything you’re entitled to at tax time.

Remember, if you’re not sure whether you can claim an expense, keep the receipt and ask your tax agent. Don’t forget the motto: You can’t claim it if you can’t prove it!

Photograph your receipts and other purchase records, and keep everything in one folder. Create a backup folder, too, just to be on the safe side.

8. What travel expenses are not allowed?

There are certain travel expenses and circumstances where travel costs are not deductible.

For example:

  • Although you can claim the cost of travel between two different workplaces, you generally can’t claim your journey from home to work and from work to home each day. The exception is if your employer requires you to transport heavy tools and there is no safe place at work to leave them.
  • You can’t claim a tax deduction for any travel expense that your employer has already reimbursed you for.

9. What if I travel for work and then spend an extra few days on holiday at the end of the trip?

This is where it gets tricky. If your travel is split between work and leisure, then all of your expenses also need to be split between work and leisure. There are two key rules here:

  • The primary purpose of your trip must be work-related, and
  • You can’t claim any part of a trip that is not work-related.

Example: Work Conference In Another State

Julie travelled to Melbourne for a week-long conference. She then stayed in Melbourne on Friday and Saturday nights to see the sights and catch up with friends.

Julie can claim in full:

  • Accommodation costs for Monday to Friday.
  • Uber fares from the hotel to the conference and back each day.
  • Meals during the week.

Julie was away for seven days, of which 5 (or 71.5%) of the trip was work-related. She can also claim 71.5% of:

  • Her flights to and from Melbourne.
  • Her Ubers to and from the airports.

Julie can’t claim leisure expenses:

  • Accommodation costs for Friday and Saturday night.
  • Meals from Friday night to Sunday.
  • Uber trips to her friend’s house.
  • Car hire and expenses for a trip she made to the Great Ocean Road.

10. Here are some additional examples of what is not allowed by the ATO:

  • Like the example above, if you travel to a work-related conference in another city and stay an extra night to visit a friend, you can’t claim any costs related to that extra night.
  • If you travel with your partner or children, you can’t claim any travel or accommodation costs for them.
  • You can’t claim an add-on flight that is not related to your work trip. For example: If you had a work trip in Mackay, you can’t claim a flight you took to see the reef in Cairns.
  • You add on a small work event while on holiday. For example, You are on holiday for two weeks in Europe, and while you’re there, you take the opportunity to attend a 2-day work-related conference. You can claim the costs of the conference. However, you can’t claim any travel or accommodation costs related to the trip because the trip’s primary purpose is a holiday, not business.

Can I Claim My Laptop as a Tax Deduction?

1. How do I claim a computer as a tax deduction?

You’re able to claim a percentage of your laptop or computer by claiming the ‘business use percentage’.

To start with, you need the following records:

  • Proof of purchase for the computer (or laptop) plus the software you use for work.
  • The purchase date.
  • The business use percentage.

2. Working out your business use percentage

You should keep a diary of usage for four weeks and make a note of the time spent on your computer for work and for personal use. You can then work out what percentage of your computer use is for work.

3. Can you claim a one-off tax deduction, or do you need to claim depreciation?

  • Was the cost under $300? If your computer cost under $300, you can claim a one-off, immediate tax deduction for the business use percentage of the purchase price. (The same goes for any software you bought that you use for your work.)
  • Was the cost more than $300? You can only claim the depreciation of your computer over the life of the equipment. The ATO states that the life of a computer is four years and two years for a laptop.

4. Do you hire your computer or laptop?

You can claim your computer expenses even if you lease or pay a monthly fee for your computer. Claim the business portion of the lease payments on your tax return.

5. Can you prove it?

Most employers provide office facilities and equipment, so you don’t need to work at home or, if you do, you don’t need to use your own equipment. 

So when it comes to claiming a computer as a tax deduction, you do need to have a genuine reason, and it must be a requirement of your job.  It’s worth bearing in mind that you’ll need to prove that personal computer use is a requirement of your job if the ATO requests further clarification.

Proof of smaller claims

If an individual’s work-related deductions add up to $300 or less, they are not required to keep receipts or other proof of purchase. The ATO has noted that some taxpayers make claims without having spent the money.

If the ATO audits the claimant, they must be able to prove that the money was spent and be able to explain why the claim is reasonable.

1. What receipts should I save for taxes?

Here’s a list of expenses you can itemise and receipts you should hold on to business use of your car and home: Keep receipts of household expenses, including rent, electricity, gas, water, insurance, and repairs. An estimated value for the item must be included on the receipt.

2. How much can I claim for the cost of managing tax affairs?

This comes as Labor proposes to limit the deductibility for the cost of managing tax affairs to $3,000 on the back of ATO data which showed that, in 2016–17, 69 people earned more than $1 million but paid no tax, with 27 of them claiming an average $607,000 for the cost of managing tax affairs.

3. How much travel expenses can I claim?

Cents per kilometre: You can claim a flat rate of 72c per kilometre for every business kilometre you cover. You’ll need to keep a diary of all work-related journeys so you can work out how many kilometres you’ve travelled for work. This method can only be used for claims up to 5,000 km’s per vehicle.

4. Can I claim my phone on tax?

Claiming mobile phone, internet and home phone expenses. If you use your phones or internet for work purposes, you may be able to claim a deduction if you: paid for these costs and. Have diary records to support your claims.

5. Are work clothes tax deductible?

Work clothes are tax-deductible if your employer requires you to wear them daily, but they cannot be worn as everyday wear, such as a uniform with a logo. So instead, deduct them the year you buy them.

6. What can I claim on my taxes in 2021?

Many deductions are well known, such as those for work-related expenses, accounting fees and charitable donations. You can also deduct income protection insurance (paid outside super) & superannuation concessional contributions.

7. Do you need receipts for taxes?

You do not need to send in proof of your expenses, like receipts, when you submit your Self Assessment tax return. However, you will need to keep records of expenses for five years after submitting your return for that tax year.

Data matching

The ATO uses a wide range of third-party data sources to verify the more than 600 million transactions reported to it annually – including banks, employers, health insurers, and state and territory revenue agencies.

This provides them with powerful fraud detection capabilities. For example, as noted in the ATO‘s announcement on “exposing dodgy deductions”, one case study refers to a claim for work-related car expenses being rejected because the records in the driver’s logbook didn’t match corresponding toll road records.

If you act as a registered tax agent, your clients must understand the potential consequences of over-claiming work-related expenses. As rulings change, keeping up with the latest developments will ensure you’re able to provide the best advice to your clients.

Helpful resources

The ATO’s tax rulings provide up-to-date information on what can and cannot be claimed. Also, an industry news tool such as the Weekly Tax Bulletin will keep you abreast of all the legislative changes and developments in the tax space, with commentary and analysis from industry experts and practitioners.

The ATO‘s myDeductions mobile app can also help reduce mistakes by providing an easy way to record work-related expenses, including photos of invoices and receipts. Then, at tax time, the data can be used to pre-fill a client’s tax return.

A list of questionnaires to help taxpayers work out whether work-related items can be considered deductibles.

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