News

Tax Time – Deduction Tips

When claiming expenses relating to your employment income, you must ensure you have spent the money yourself and were not reimbursed by your employer. The expenses must be directly related to your income, and you must keep the appropriate records.

Tax Time – Deduction Tips

Like many of us who have continued to work from home, you may be planning to claim additional expenses. With so many claiming working from home expenses, the ATO has the following four deduction categories on its watchlist:

  1. Expenses related to a child’s education, such as laptops and online training.
  2. Claiming large upfront deductions, instead of claiming depreciation for assets – the instant asset write-off only applies to businesses, not employees.
  3. Personal expenses, food, beverages, toilet paper, cleaning costs – these are personal and non-deductible.
  4. Occupancy expenses such as rent, mortgage interest, property insurance, land tax and rates. These cannot be claimed by employees working from home, instead the ATO allows a flat 80c per hour deduction. There is a small exception to this rule if your employer doesn’t offer a workspace so, please let us know if this applies to you.

You need to keep records and show evidence of expenses incurred especially if you intend to claim 100% of the cost. If you wish to avoid the attention of ATO, ensure you claim allowable deductions.

There may be less focus from the ATO if you are claiming the standard 52c per hour or the COVID 80c per hour working from home rate. If you use the ‘COVID’ or ‘standard cents per hour’ methods, ensure you keep a time diary to substantiate your claims.

The ATO has also mentioned “the copying of expenses from prior years” — generally regarding car and travel expenses. If you have continued to work from home during the year, then it may be assumed that car and travel expenses would decrease in your tax return. Now more than ever, it is important to ensure you claim only the expenses incurred and ensure you have the correct records to prove it.

On the other hand, the ATO is aware that some deductions may increase, for example:

  1. Clothing and laundry — particularly for medical or frontline workers.
  2. Personal protective equipment (PPE) or cleaning items like hand sanitiser.
  3. Depreciating equipment — computer monitors, desks and chairs.

Other common tax deductions for employees are:

  • Donations to charitable organisations (over $2);
  • Personal super contributions;
  • Income protection insurance;
  • Union or professional membership fees;
  • Conference and seminar fees;
  • Car expenses where you travel directly between two jobs.