Whether you are an employee or a small business owner, if you have incurred a cost that directly relates to the income that you have earned, then you may be able to claim a tax deduction for this. You must have spent the money yourself, not have been reimbursed and have a record to prove it. Remember to apportion it accordingly if the expense you are claiming is for both work and private use.
We have a list of Industry specific deductible expenses that may assist you.
Lets look at a few of the Most common deductions :
Vehicle and Travel Expenses
Remember that you MUST keep records of these expenses and you must be the owner of the vehicle.
METHOD 1 : Cents per Kilometre
Under this method you are only able to claim up to a maximum of 5,000 kilometres per year, per vehicle and the value is calculated by multiplying the total business kilometres travelled by the standard rate (from the ATO) * This is 72c per km in the 2021 year.
You do not need written evidence like receipts and dockets, but you must be able to demonstrate that you have travelled those kilometres for work. (Eg : A Diary)
METHOD 2 : Logbook
This method is based on the percentage use of your vehicle for work purposes and is determined by a log book. The log book must have been kept for at least a 12 week period and be updated every 5 years. Through the logbook method you are able to claim all your expenses relating to the vehicle, based on the percentage of business use. Even Depreciation!
HINT : You must record when the log book begins and ends and the start and end of each travel. All receipts are required to justify this claim method, so remember to keep all your fuel receipts, insurance, servicing and registration.
TOP TIP : Record the start and end odometer readings for the year as if you lose any fuel receipts, petrol can be estimated using these readings.
Tools and Equipment
Whilst the threshold differs between an employee and a self employed person, a self employed person / business may be eligible for the simplified depreciation rules.
The main consideration here is whether or not it can be claimed all at once, or if it must be depreciated over a number of years. This instant tax write off may be just what your business needs.
Clothing & Laundry Expenses
You can claim the cost of particular clothing and their laundry costs, however, there are strict rules around what clothing is eligible.
The clothing cannot be of a generic nature (black pants or business suit), even if your boss requires you to wear them. Unless the clothing is industry specific (Chef pants), are of a protective nature (ie: steel capped boots) or carry your company's logo speak with us before claiming them as a deductible expense.
Working from home deductions
If you carry out all or part of your employment activities from home, then some portion of your home office expenses can be claimed as a tax deduction.
During Covid, the ATO introduced (and extended) the 80c per hour deduction, which includes all of your expenses, including your telephone and internet expenses. With this is mind, in certain circumstances, you may actually be better off claiming the standard working from home deduction of 52c per hour, so that you can also claim your business portion of your telephone and internet. It's worth doing the calculation.
Personal Superannuation payments
Remember to consider the concessional cap, but if you contribute additional AFTER Tax superannuation (read more here) you may be eligible for a tax deduction for this contribution. Whilst it doesn't include salary sacrificed superannuation, there are many industries (eg: Teaching ) where you may be forced to pay additional after tax superannuation. Provided that you submit a letter of intent to your Super fund (and you receive their confirmation), you may be able to claim a deduction for these contributions. Please speak with us before lodging your tax return.
Gifts and Donations
Gifts and donations can be claimed for donations of $2 or more, however, if you don't hold a receipt you are only able to claim up to a maximum of $10 for these donations.
Remember that whatever you are gifting, it must be a true gift / donation and you cannot receive anything in return.
The status of the organisation that you donate to must be registered as a DGR (Deductible gift recipient).
Professional associations, magazine subscriptions and trade union fees
If, as part of your profession, you are a member of an association, or purchase magazines or publications that are directly in line with your work you are able to claim these expenses as a deduction.
Union fees too, are a claimable deduction.
Tax Preparation and even travel expenses to see your accountant
If you were savvy enough to engage a tax professional to complete your return last year, then you can claim this expense in the year that you paid the bill.
Self Education Expenses
Whilst self education expenses are deductible, the expense must be directly linked to your actual work and have a significant connection to your CURRENT employment. It must maintain/improve your skills and knowledge required to do your current job and result in (or likely to) an increase in your income.
It is not a deductible expense if you simply study something to change your career.
Please share this article with your friends and colleagues and let us know if you need our assistance this year with your tax returns.
This articles intention is to inform rather than advise and is based on legislation at the time. Each Taxpayer’s circumstances vary so we strongly recommend that you discuss this information with your Tax Agent, Accountant or Bas Agent before implementation. If you take, or do not take action as a result of reading this article, we accept no responsibility for any financial loss incurred. This is general advice only. Source : ato.gov.au