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The top deductions you can claim to easily maximise your tax refund

Here are our five top tips for using tax deductions to your advantage and boosting this year’s tax return.

One of the easiest ways to boost your tax return is by taking advantage of the deductions you're able to claim. Claiming tax deductions reduces your taxable income, meaning you'll pay less tax and hopefully get a bigger tax return. In this guide, we've listed our top five tips for easily claiming tax deductions.

There are many, more complex deductions you can claim to reduce your taxable income. One way to ensure you're claiming all the deductions you can is by getting a professional to do it for you. A tax agent will know the ins and outs of the tax system, and will help you maximise your tax return.

Choosing a tax agent

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1. Charity donations

This is one of the most common things people forget to claim, or incorrectly claim as a tax deduction. If you’ve only dropped some spare change in a bucket at a convenience store counter you’re probably not eligible to claim this as a tax deduction. However, if you are one of the many who make regular contributions to a charity every month, you may be eligible to claim something back at tax time. There are just a few things you need to check before claiming a gift or donation.

If your contribution meets the below conditions, you're most likely eligible to claim it as a tax deduction:

  • Does the organisation have DGR (Deductible Gift Recipient) status?
  • Is the gift truly a gift and not something you receive material benefit or advantage for?
  • Do you have proof of these payments in the form of a receipt or bank statements?
  • The donation must be in the form of money or a financial asset (i.e. you can't gift items like clothes and claim the cost as a deduction)
  • The gift must be $2 or more

Below are the contributions that the Australian Tax Office (ATO) does not classify as a gift or donation:

  • Raffle or art union tickets
  • Items such as chocolates and pens
  • Cost of attending fundraisers
  • Membership fees
  • Payments to school building funds as an alternative to an increase in school fees
  • Payments that may provide a material benefit for the donor including raffle tickets which may win a prize

2. Car and travel expenses

Car and travel costs seem to be an expense most people are comfortable claiming on their tax return. However, taking a guess at the amount of expenses incurred can land you in hot water, as can making an illegitimate claim like travel to and from work. That’s why it’s important to ensure what you’re claiming is considered a travel expense in the eyes of the ATO. Properly claiming these expenses can save you a lot of money come tax time, so it's worth getting it right.

If you use your vehicle for work, claimable vehicle and travel expenses include:

  • Depreciation of your vehicle
  • Registration costs of your vehicle
  • Insurance costs of your vehicle
  • Costs of running your car such as fuel, oil and servicing

Vehicle and travel expenses that are not claimable include:

  • The initial purchase cost of your car
  • Parking tickets and other speeding fines

You may be able to claim vehicle and/or travel expenses if you fall into the following situations:

  • The cost of travelling between two separate work places
  • The cost of travelling from your workplace to other locations, e.g. client meetings, project work sites
  • If you are required to carry big work-related items such as tools or a ladder and these can't be left at work

You're not eligible to claim travel or vehicle expenses for the following situations:

  • Travel directly to and from work, as this is generally seen as private travel
  • If you don't live near public transport and need to drive to work

How to correctly claim your car and travel expenses

There are two ways to claim your vehicle expenses as a tax deductions. Read through the below and select the option you feel is best for you. Again, a tax agent will be able to help you correctly claim these expenses so you don't need to stress about doing it wrong.

  • 1. Cents per kilometre method. Using this method, you can claim 66 cents per kilometer for the 2016-17 financial income year. You can claim 66 cents per kilometer driven for work related reasons (as determined above) up to a maximum of 5,000 business kilometres per car. You need to be able to show how you worked out your business kilometres, in case the ATO requests additional information or proof.
  • 2. Logbook method. You can work out the vehicles expenses and what percentage of those were business expenses. To do this, you need to keep a detailed logbook for a period of 12 continuous weeks. You need to record the travel dates, times and odometer readings, the kilometres travelled and reason for the journey.

3. Work related expenses

Many expenses that you accumulate through your chosen career path can be claimed in your tax return. However, many cannot, and incorrectly claiming these may result in a penalty from the ATO. Some are more obvious than others, like an apprentice’s tools or travel expenses (as explained above). However, did you know that journalists may be eligible to claim their pay tv costs? So long as these are incurred in the course of performing their work (for example, a sports journalist that needs to have access to the sport channels), they can be claimed as deductions.

There are thousands of things you may be eligible to claim as work related expenses. Make sure the expense meets the following criteria:

  • The item is needed to perform your job e.g. tools or special shoes such as steel cap boots
  • The item is needed for self-protection or safety when doing your job e.g. sunscreen and sunglasses if you are required to work outside
  • Is used solely for work purposes (if you have a laptop that you use for work and personal use, you're only entitled to claim the portion that you use for work)
  • Self-education expenses, such as courses and certificates, need to be directly related to your profession and will help you get a promotion or a pay rise

There are too many possible claims to list in this article, but if you head over to the ATO’s website you’ll find over 40 guides to ‘deductions for specific industries and occupations’.

4. Working from home? Don’t count yourself out

There are many, many ways you can claim work related expenses, fortunately, this also includes working from home. If you’re running a business from home (full-time or part-time) that requires you to use computers, phones and other electronic devices, you could be eligible to claim deductions on certain costs. You should keep receipts for all work-related purchases you wish to claim, in case the ATO requires further proof. These deductions can include the following:

  • Expenses incurred from cleaning office space
  • Purchase and repair costs for office furniture and fittings required to do your job
  • Landline and mobile phone calls related to work matters (you should get an itemised phone bill and highlight the work-related calls)
  • A portion of your monthly internet bill
  • Lighting
  • Air conditioning costs

Amazingly, you can also claim a portion of your occupancy expenses, like rent, mortgage, and home insurance, so long as you operate your business solely from your home and have a dedicated space for business activities. Check the table below for a quick guide to see if you can claim working from home expenses.

You work solely from home and have a dedicated office spaceYou don’t work solely from home but have a dedicated office spaceYou work solely from home but don’t have a dedicated office space
Rent, mortgage, home insurance etc.
  • .
  • .
  • .
Work related phone and internet costs
  • .
  • .
  • .
Depreciation of office equipment
  • .
  • .
  • .
Maintenance costs (Office fittings etc.)
  • .
  • .
  • .
Gas and electricity costs
  • .
  • .
  • .

5. Work clothing

Work clothing is something that many people claim incorrectly, and the ATO has said it will be cracking down on this so it's important to get it right. Despite what many people think, not everyone is entitled to claim laundry expenses as a tax deduction. Make sure your clothing meets one or more of the following criteria before claiming it as a tax expense:

  • It must be specific work clothing that is required for your job and compulsory to wear
  • It must have a logo or be registered with AusIndustry
  • There must be a strictly enforced policy making that item compulsory to wear. For example, simply having to wear black is not specific enough to claim as a deduction
  • It must be worn solely for work purposes and not worn outside of work or for personal use
  • The clothing is required for your protection at work (e.g. safety glasses)
  • The clothing is occupation specific (e.g. black and white checked pants for chefs)

As with all other deductions, it's best to check anything you want to claim with your tax agent to ensure you're eligible and avoid a penalty with the ATO.

Got it, what do I do now?

Speak to an accountant/tax specialist. If you’re a stickler for the finer details, this might not be necessary for you. But, if you simply don’t have the time to sort through wave after wave of receipts, then why not let an accountant do all the work for you? Not only is using an experienced accountant the best way to avoid making an illegitimate claim, it’s also the easiest way to maximise your tax return. Sure, there will be a fee to pay, but unless you’re a tax whiz, you’re likely to earn enough back to cover the consultations costs – even better still, most tax specialists will accept payment directly from your tax return, so you won’t have to worry about payment until you’re reeling in that bountiful return. And to top it off, you can claim the cost of the accountant in next years tax return! If you're looking for more information on tax deductions, check out our additional guide.

DISCLAIMER: 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.


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6 Responses

  1. Default Gravatar
    SameerJuly 12, 2017

    Hi,
    I need to ask that how to count the medical levy and as I am doing Certificate III Commercial Cookery through apprenticeships and working in restaurant. Please guide me. I am citizen here.

    • Staff
      JonathanJuly 26, 2017Staff

      Hello Sameer,

      Thank you for your inquiry today.

      You can access the Medicare levy calculator on ATO website right here.

      Hope this helps.

      Cheers,
      Jonathan

  2. Default Gravatar
    January 20, 2017

    I made 56,000 last I paid 5400 in federal taxes I also paid 814 in Union dues and 4300 in childcare. Is there anyway to estimate what my tax refund would look like I claim myself and 3 children.

    • Staff
      AnndyJanuary 23, 2017Staff

      Hi Slim,

      Thanks for your question.

      Please note that we are a financial comparison and information website that helps consumers make better decisions. We are not tax experts.

      It would be best if you directly get in touch with a tax expert in your country who is able to help in preparing your tax return.

      Cheers,
      Anndy

  3. Default Gravatar
    HeatherOctober 6, 2016

    Husband earns 92000 plus has a compnay car fuel paid services etc – he woks from home and in and office – has a uniform – should he expect any kind of tax rebate as yet we dont have any

    • Staff
      ClarizzaOctober 7, 2016Staff

      Hi Heather,

      Thanks for your question.

      You might find our income tax calculator useful in this case. The calculator will show how much tax your husband is liable to pay based on his gross income for the last financial year. On a gross income of $92,000 he is liable to pay $21,987.00 in tax. If he has already paid more than this amount, he may be eligible for a tax rebate. If he hasn’t paid the liable amount then he owes the difference. There are a variety of things your husband can claim if he works from home and in an office, however it will depend on his personal situation. You can find more information on our How to Claim a Home Office page or speak to an online tax agent to discuss your situation further.

      Hope this has helped.
      Clarizza

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