Here are 10 common tax deductions Aussies are getting wrong which could land them in hot water with the ATO.
1. All car-related costs including home to work travel
Contrary to what Aussies might assume, while you can claim expenses if you are having to drive for work or between workplaces, the commute to and from work from your home is considered personal travel and cannot be deducted.
You can claim your car expenses up to 5000 kilometres for work-related travel.
Under the cents-per-kilometre method, taxpayers do not need to keep receipts, but you need to be able to demonstrate how you worked out the number of kilometres you travelled for work purposes.
It’s better to keep a logbook to stay on track of your work-related car use.
Not only does using the logbook method usually lead to a bigger deduction claim, but the Australian Tax Office (ATO) is paying special attention to taxpayers who automatically claim the 5000 kilometres limit regardless of how much they actually travelled.
2. Home office expenses
Unless you actually work from home with no physical office, or you’re running your business from home, your rent, electricity, rates and mortgage interest cannot usually be claimed as tax deductions.
And, if you can claim these items you can’t claim them in full – you need to work out the percentage of your total home use and how much you use for work, and apportion your claims accordingly.
While we’d all love for the government to shout our meals, unfortunately, it is your responsibility to feed yourself during your normal work hours.
The only way to claim food costs is if you were to travel outside of work hours, such as an overnight stay, and were not reimbursed for the meal costs.
If you receive an overtime meal allowance and it appears on your PAYG summary, you may be able to claim a deduction, as long as you have spent the money.
In this circumstance, there are some conditions you need to meet. We recommend you talk to your tax agent to find out what you’re entitled to.
Even though you’re likely to have purchased new professional attire for an office work environment recently, most people don’t realise that these expenses cannot be claimed back even if it’s compulsory to wear business clothes as part of your job.
Unless you have to buy clothing with specific company branding on it that isn’t available to the general public or safety gear such as a lab coat or high vis shirt, your work clothes probably can’t be claimed as tax deductions.
Similarly, if you work in retail and are required to buy and wear the label’s clothing, this is considered casual attire as you are not distinguished from any of the customers.
Many people are under the impression that if something has to be clean and worn for work, you can claim laundry and dry-cleaning expenses for it.
However, if you cannot show receipts and a need to spend on laundry costs, these claims cannot be made.
The ATO considers most laundry expenses over $150 to be a red flag and often unnecessary, and again, it’s only the professional cleaning of your branded uniforms or safety gear that you can claim.
If your uniform isn’t claimable per the rule above, you can’t claim the laundry costs either.
6. Studies or extra education
The government is not responsible for covering your personal education costs and hobbies.
If you are taking an extra course or program to learn a new skill that is not directly related to your profession to help you succeed, the ATO will consider this a personal expense.
For example, if you’re a lawyer taking an art course, you will be required to cover that training yourself.
For a self-education deduction to be allowed it must be directly related to your current job – it can’t be to get you a new job.
7. Luxury items
Although many stores advertise tax deductions on their products saying that if bought before June 30 you can claim back the full cost, this isn’t true.
You can make instant deductions for items that cost less than $300, but for anything over this price, the deduction claim gets spread over a number of years and takes into account the life expectancy of the item.
So, claiming back the full price of a new laptop or car is generally not permitted.
8. Business trips
While you can claim part of your work-trip expenses back on your taxes, such as accommodation, overnight meals, car hire charges, air, bus, train and taxi fares, everything has to be specifically work-related.
If you are going for a drink by yourself, partake in activities for leisure or decide to stay on holiday for an extra few nights when the business matters have concluded, these expenses cannot be claimed back.
Just because you are away for a work trip does not mean that everything you do and spend during that time can be expensed in your tax claim.
9. Mobile phone and internet costs
While it is true that work-related phone and internet costs can be claimed on your tax return they usually can’t be claimed in full.
Every year Australians try to claim their entire phone and internet bill on their tax deduction, but their own personal usage is not a government cost.
You need to consider the portion of your bill that is used on work calls and research, and only expense that part.
10. Going it alone and getting into trouble at the ATO
While not technically a tax deduction it’s an important point to mention none the less.
Every year thousands of taxpayers brave their tax return without the help of an accountant and find themselves in ATO trouble for claiming something they weren’t entitled to.
Remember, it’s the ATO’s job to collect revenue not get a bigger refund so if you’re not sure about anything tax-related always as a tax agent as they’ll make sure you get it right.