Tax tips: The top 5 tax deductions you can claim
Want to maximise your tax return? Use these tips and get more money back this tax time.
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One of the easiest ways to boost your tax return is by taking advantage of the deductions you're able to claim. Here's our top five tax tips to help you get more money back at tax time.
1: Claim as many work-related expenses as you can
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.
Here's a few examples that you might be eligible for:
- Tools and work-specific clothing. The item is needed to perform your job e.g. tools that tradesmen use, equipment that hairdressers use, special shoes such as steel cap boots.
- Safety items. Item's needed for self-protection or safety when doing your job e.g. sunscreen and sunglasses if you are required to work outside
- Laptops and mobile phones. If these are used for work purposes you're able to claim it on tax (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).
- Courses and conferences. 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.
2. Claim tax deductions for working at home
If you work from home full time, part time or only on the odd occasion, you're eligible to claim this as a tax deduction. For example, 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. This even included the cost of your home internet and electricity bills!
Working from home tax deductions can include the following:
- Cleaning costs. The expenses incurred from cleaning office space at home.
- Office furniture. Purchase and repair costs for office furniture and fittings required to do your job.
- Your phone bill. Landline and mobile phone calls related to work matters (you should get an itemised phone bill and highlight the work-related calls)
- Your home internet bill. You can claim a portion of your monthly internet bill, in line with how often you use it for work purposes.
- Electricity bills. You can also claim a portion of your home electricity bills, in line with how often you work from home.
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. It's important you claim working from home expenses correctly, to avoid a penalty from the ATO. You'll need to show evidence and your calculations to justify how much you're claiming. A tax agent can do this for you to ensure you're claiming correctly.
3. Use a tax agent (they'll help maximise your return and their fee is tax deductible!)
For a lot of people, using a tax agent to lodge your tax return is the easiest way to ensure you're claiming everything that you're eligible for. Here's how tax agents can help you this tax time:
- Claim the tax agent fee as a tax deduction. You might be surprised to learn that the cost of using a tax agent is completely tax deductible.
- Claim more deductions. Tax agents know the ins and outs of the tax system so they'll be able to help you claim everything you're entitled to, even things you might not be aware that you're entitled to claim.
- Claim correctly. If you don't claim your deductions correctly, you could be hit with a fine from the ATO. Tax agents will help make sure you've claimed everything correctly so you can have peace of mind after you lodge your return.
- Help with calculations. Claiming things like home office expenses and car use can be really tricky and time consuming. You'll often need to create a log book, or show your working for figuring out how much you can claim. Tax agents are professionals at this, so it can save you a lot of time and stress.
- Offer tax tips. Tax agents can also offer you extra tax tips and tips for organising your finances in general.
- Individuals starting from $79*
- Sole trader starting from $150*
- Ride sharing tax returns start from $110*
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*This is the minimum fee charged for income item tax returns. The price listed on this table is subject to terms and conditions. To find out more or to receive an accurate quote for your tax return, please visit the agent's website to submit an enquiry.
4. 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.
- Cents per kilometre method. Using this method, 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. The amount you can claim per kilometre is reviewed annually and subject to change. 66 cents per kilometre was the rate in both the 2015-16 and 2016-17 financial income years, and as yet, no updated advice has been published by the ATO. You need to be able to show how you worked out your business kilometres, in case the ATO requests additional information or proof.
- 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.
5. Don't forget about charity donations
There are just a few things you need to check before claiming a gift or donation.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.
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
Bonus tip: Here's how to claim work clothing correctly.
Work clothing is something that many people claim incorrectly, and the ATO had a crackdown on this in recent years so it's important to get it right. It must be specific work clothing that is required for your job and compulsory to wear. 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 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. If you're looking for a more comprehensive list of tax deductions, check out this guide.
DISCLAIMER: This article is general advice. It does not consider your own personal circumstances and may not be applicable to you. You should obtain professional advice and consider your own situation before acting on anything contained in our article.
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