All your general tax deduction questions answered.
When you’re completing your tax return, you may be able to claim a number of expenses that are directly related to earning your income. Deductions are purchases that you can deduct from your total taxable income, meaning you could pay less tax. Your taxable income is the income that your tax is calculated on.
This guide will look at the general rules surrounding tax deductions, as well as some specific examples and legislation. If you want information on a specific deduction, you can skip ahead to the examples and questions section of the guide.
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What are work related tax deductions?
Work related deductions are expenses that you incur as a direct result of your occupation. The Australian Tax Office (ATO) is very specific in its definition of work related deductions and will check to ensure that they are legitimate.
How do I know if I can claim something as a tax deduction?
If your purchase meets any of the following requirements, you may be able to claim it as a tax deduction with The ATO:
- The purchase or expense was made in the tax year for which you are claiming the deduction.
- The expense was directly related to your employment.
- If the expense was related to your employment and also for personal use, you can prove what portion is used for your employment.
- You paid for the expense yourself and it has not been reimbursed by your employer
- You have proof of the purchase, such as receipts or a logbook, to support your claim for all deductions over $300
What are some things I can claim on tax?
Depending on your circumstances, you may be able to claim the following as a deduction on your Australian tax return. Remember to ensure these meet the criteria in the checklist above.
- Formal education courses related to your field and provided by a professional association
- The attendance of a work related seminar
- The purchase of journals, magazines and/or books relevant to your field
- The attendance of work related conferences or education workshops
- Tools and equipment necessary to perform your job with success
- Union fees
- Meals purchased while working overtime
- The purchase of protective products needed for the course of your work, such as sunglasses
- Computers and software used in the course of your employment
- Home office expenses
- The premiums for income protection insurance
What’s not claimable as a tax deduction?
There are some expenses that you incur during the year that may seem work related, but are not an allowable deduction. These include, but are not limited to the following:
- The cost of obtaining a driver’s licence, even if it’s a necessary condition for employment. If the job requires a special driver’s licence, the difference in cost between that and a standard licence may be allowed.
- Vaccinations against diseases that may be contracted through the course of employment.
- Child care expenses are not deductible, although you might be eligible for a child care rebate or child care benefit.
- The cost of commuting to and from work.
- Grooming expenses such as hairdressing and makeup.
- Relocation expenses.
- The cost of a police clearance certificate or police record check.
- Even if provided an allowance by your employer, you are not automatically entitled to a deduction.
How do income tax deductions work?
Your taxable income is the total amount of money that you’re required to pay tax on. By claiming a work related expense as a tax deduction, you are reducing your taxable income and therefore reducing the amount of tax you’re legally required to pay.
For example, if your total taxable income is $50,000 and you claim $2,000 worth of work related expenses as tax reductions, your total taxable income will be reduced to $48,000. This means you will only pay tax on that $48,000.
Taxable income table
In some cases, claiming work related deductions may even push you down into a lower tax bracket. For example if your taxable income is $38,000 and you claim $2,000 worth of deductions, your taxable income will fall into the lower tax bracket. Of course, this is subject to the ATO’s approval of your claimed deductions. In some cases, claiming work related deductions may even push you down into a lower tax bracket. It's important, therefore, to keep a proper account of any work-related expenses you incur over the year, and then assess whether these can be used to reduce your taxable income come tax time.
Take a look at the table below to see which tax bracket you fall into for the 2016/2017 financial year.
|Taxable income||Tax on this income|
|$0 - $18,200||Nil|
|$18,201 - $37,000||19c for each $1 over $18,200|
|$37,001 - $87,000||$3,572 plus 32.5c for each $1 over $37,000|
|$87,001 - $180,000||$19,822 plus 37c for each $1 over $87,000|
|$180,001 and over||$54,232 plus 45c for each $1 over $180,000|
Are there different tax deductions for different occupations?
Your expenses as an employee will be unique depending on your chosen occupation, and there are certain allowances made for different fields. For example, certain performing artists may be allowed to claim hairdressing and makeup as a deduction, while a real estate agent may not, even though appearance is also an important component of that occupation. If you're looking for information on a specific occupation, you can find it via the ATO's website here.
Do I need receipts?
The Australian Tax Office can ask for supporting evidence of deductions made on a tax form. If you are unable to provide receipts or purchase orders the claim could be denied. If your total claim is equal to or more than $300 you must have evidence to support it all, not only for the amount in excess of $300. Those records should be kept for a minimum of five years after the tax form has been lodged.
Is my car tax deductible?
Travel to and from work is not a deductible expense, but you may be able to claim travel related to your work if you’re using your own vehicle. For example, the cost of driving directly to work is not claimable, however if you need to drive your own vehicle to several sites throughout the day this may be claimable. You’ll need to keep a detailed log book if you want to claim these trips. Read our guide on claiming your car as a tax deduction for more information.
Can you claim car parking and tolls as a tax deduction?
You can not claim car and travel expenses for costs incurred travelling to and from your workplace, as this is classed as private use. This includes parking costs and tolls. However, if you can prove that you are required to drive your car to and from work to carry bulky tools or equipment, you may be able to claim these expenses.
If you are required to travel from your workplace to other sites, for example to client meetings, this is then classed as work-related travel and you may be entitled to claim parking and toll costs. Remember to keep all receipts and proof in the form of a log book.
Are parking tickets, fines and penalties tax deductible?
No, you can not claim parking tickets as a tax expense, even if you were parking for work. Any violation of the law is not tax deductible. However, you may be able to request your employer pay the ticket or reimburse you. This is of course at the discretion of your employer.
Can I claim my uniform, clothing, laundry and dry-cleaning expenses?
You can only claim clothing expenses if you can prove they are a required part of your employment, such as a nurse or police officer uniform. It must have a logo and it must be compulsory to wear. In certain circumstances you may be able to claim clothing expenses if it’s required to keep you safe, for example protective glasses.
Can I claim gifts and donations as a tax deduction?
If you wish to claim a donation or gift as a tax deduction, you must first ensure that the receiving organisation has the status of being a deductible gift recipient (DGR). You also can't receive anything material in return for the donation, and it must be in the form of money or a financial asset (e.g. you can’t claim clothes you’ve donated).
Are school fees tax deductible?
No, school fees and school uniforms are not tax deductible. You also can’t claim the cost of attending school excursions, tutoring, sports and music equipment or school photos.
Are medical and health expenses tax deductible?
In special circumstances, you may be able to claim expenses for disability aids, attendant care or aged care. However, this tax offset is determined by assessing your income and family status. The ATO will determine what tax offset, if any, you’re entitled to receive.
Is my accountant tax deductible?
Absolutely! You can claim the cost of hiring an accountant or tax professional to lodge your tax return in the following year's tax return. This is the beauty of seeking professional advice instead of trying to lodge your return yourself.
Is a police check tax deductible?
In some cases, yes. The initial cost of getting your first check in order to gain your first job in the industry is not deductible. However, if you’ve already been working in the industry and you’re required to get a new check in order to continue your employment, you may be able to claim this.
What tax deductions can you claim without receipts?
Some expenses may not come with a physical receipt. For example, if you work from home sometimes and want to claim a portion of your home internet costs, you won’t have a receipt for this usage as it’s only partly work-related. As a general rule, you can claim up to $300 without receipts. However, this isn’t a green light to simply claim $300 back each year. You still need to be able to show how you calculated the expenses.
How much can I claim on tax?
There is no limit to the amount you can claim on tax each year. However, you need to have proof of the expenses you’re claiming.
How do I claim home office expenses?
If a part of your employment entails working from home, you are entitled to claim expenses related to any electronic equipment that is necessary to carry out your job responsibilities. This includes computers, printers, work related phone calls, lighting, heating and cooling and cleaning expenses. It is very important that you keep detailed records of all of these expenses including a diary that works out how much you used the space and equipment for work over a representative four week period.
Can I claim interest, dividend and other investment income?
If a part of your earnings include interest, dividend or other investment income, certain expenses related to those may be deducted. For example, if you’ve paid fees for an account or management of your investment, you may deduct those costs from your earned income. You may also like to read our guide on how interest is taxed on your savings account.
Can I claim self-education expenses?
If you take a course in order to obtain a formal qualification relevant to your occupation you can deduct a portion of the tuition fees plus certain other expenses related to the class. You need to be able to prove that the course is directly related to your job and will likely result in you increasing your income.
Can I claim tools, equipment and other assets?
The cost of tools and equipment is deductible if they are necessary for the scope of your employment. The cost of the equipment dictates the type of deduction you can claim. For example, if an item is not a part of a set and costs less than $300 or is a part of a set that costs less than $300 you can claim the cost. If they cost more than $300 you can claim a deduction for their decline in value. You can find a list of common deductible equipment.
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It is not easy to navigate through all of the applicable deductions, yet you don’t want to miss any as this will affect the amount of taxes you owe or your refund. If you want to ensure that you have included all of the items you have purchased that are tax deductible, you may want to speak to a tax agent or an accountant. Remember, the cost of your accountant is tax deductible!
They can provide you with a comprehensive list of all of the expenses you may have incurred through your job over the year and whether or not you may include it as a deduction.
For help choosing a tax agent, view our table at the top of the page to compare different service types and offerings.
There may be other expenses that you can claim as well, such as books or periodicals that relate to your occupation. Consider if the expense was necessary to earn your income and not private. If so, and it does not fall under the ‘what’s not claimable’ category mentioned above, there is a chance that you can claim it.
If you are unsure if you will be able to deduct an expense, it is best that you keep the receipt and either contact the Australian Tax Office or consult with a qualified tax expert when it comes time to complete your tax forms. Attempting to reduce your income with non-eligible expenses could result in a rejection of your claim and further scrutiny by the Australian Tax Office.
DISCLAIMER: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information applicability to their own particular circumstances.