What are main expenses that can be claimed as tax deductions?

We are aware that tax payers are interested in getting the right deductions for their tax returns. Claiming the right deductible expenses are one of important area to look after in tax return lodgement. Claiming lesser than what client deserves is unjust on part of tax payer and on the other hand excessive claims may put you at risk of audit and penalties. So here we are discussing few of main deductions to help out our clients. This is a general overview of deduction, these may or may not be applicable on your specific tax scenario. Please consult tax agent before reaching at conclusion.

Below is the list of expenses you may be eligible to claim as tax deductions

Using the car for work

The taxpayer cannot claim the cost of normal trips between home and work as the expense is private. It cannot be claimed even if:

  • they did minor work-related tasks – for example, picking up the mail on the way to work or home
  • they had to travel between home and work more than once a day
  • they were ‘on call’ – for example, the taxpayer was on stand-by duty and their employer contacts them at home to come into work
  • there was no public transport near where they work
  • they worked outside normal business hours – for example, shift work or overtime
  • their home was a place of business and they travelled directly to a place of employment where they worked for somebody else.

The taxpayer can claim the cost of trips between home and work where:

  • they used their car because they had to carry bulky tools or equipment that they used for work and could not leave at work – for example, an extension ladder or cello
  • their home was a base of employment – the taxpayer started their work at home and travelled to a workplace to continue the work for the same employer, or
  • they had shifting places of employment – the taxpayer regularly worked at more than one site each day before returning home.Taxation Ruling TR 95/34 – Employees carrying out itinerant work has more information on travel expenses for employees who have shifting places of employment.

The taxpayer can claim the cost of using their car to travel directly between two places of employment – for example, if they had a second job.

Travel expenses that can be claimed

The taxpayer can claim travel expenses directly connected with their work. If their travel was partly private and partly for work, they can claim only the part that related to work.

Travel expenses they may be able to claim include meals, accommodation and incidental expenses incurred while travelling overnight for work – for example, going to an interstate work conference. Generally, if the travel does not involve an overnight stay, the taxpayer cannot claim for meals even if they received a travel allowance.

Other travel expenses that the taxpayer may be able to claim include air, bus, train, tram and taxi fares, bridge and road tolls, parking and car hire fees.

The taxpayer cannot claim a deduction for any expenses they incur for the direct operation of a car that their employer provides, which at any time is used privately by them or their relatives, even if the expenses are work related. Examples of direct operation expenses are petrol, oil and repairs. Such expenses form part of the operating costs of the car for fringe benefits tax purposes. However, they may be able to claim expenses linked to the car that are not related to its direct operation, such as parking fees and bridge tolls.

The taxpayer cannot claim the cost of normal trips between home and work as the expense is private. The travel is private and cannot be claimed even if:

the taxpayer did minor tasks – for example, picking up the mail on the way to work or home

they had to travel between home and work more than once a day

they were ‘on call’ – for example, the taxpayer was on stand-by duty and their employer contacted them at home to come into work

there was no public transport near where they work

they worked outside normal business hours – for example, shift work or overtime, or

the taxpayer’s home was a place of business and they travelled directly to a place of employment.

The taxpayer can claim for the cost of trips undertaken between home and work if:

they used their vehicle or had other travel expenses because they had to carry bulky tools or equipment that they used for work – for example, an extension ladder or cello

their home was a base of employment – the taxpayer started their work at home and travelled to a workplace to continue the work, or

they had shifting places of employment – the taxpayer regularly worked at more than one site each day before returning home. Taxation Ruling TR 95/34 – Employees carrying out itinerant work- deductions, allowances and reimbursements for transport expenses has more information on travel expenses for employees who have shifting places of employment.

The taxpayer can claim the cost of using their care to travel directly between two separate places of employment – for example, when they had a second job.

Compulsory work uniform

This is a set of clothing that identifies the taxpayer as an employee of an organisation which has a strictly enforced policy that makes it compulsory for them to wear the uniform while at work.

The taxpayer may be able to claim a deduction for shoes, socks and stockings where they are an essential part of a distinctive compulsory uniform, the characteristics of which – colour, style, type – are specified in their employer’s uniform policy.

If you need more information about work uniforms, read Taxation Determination TD 1999/62 – Income tax: what are the criteria to be considered in deciding whether clothing items constitute a compulsory corporate uniform/wardrobe?.

The taxpayer may be able to claim for a single item of distinctive clothing, such as a jumper, where it is compulsory for them to wear it at work.

Non-compulsory work uniform

The taxpayer cannot claim expenses incurred for non-compulsory work uniforms unless their employer has registered the design with Ausindustry – check with the employer (who will be able to find the information at www.ausindustry.gov.au).

Shoes, short socks and stockings can never form part of a non-compulsory work uniform and neither can a single item such as a jumper.

Occupation specific clothing

This is clothing that is specific to the taxpayer’s occupation, is not every day in nature and would allow the public to easily recognise their occupation – for example, the checked pants a chef wears.

Protective clothing

This is clothing and footwear that the taxpayer wears to protect themselves from the risk of illness or injury posed by their income earning activities or the environment in which they are required to carry the activities out. To be considered protective, the items must provide a sufficient degree of protection against that risk. Examples of protective clothing include fire resistant and sun-protection clothing, safety-coloured vests, non-slip nurse’s shoes, rubber boots for concreters, steel-capped boots, gloves, overalls, and heavy duty shirts and trousers. Overalls, smocks and aprons that the taxpayer wears to avoid damage or soiling to their ordinary clothes during the course of their income earning activities are also considered to be protective clothing. Ordinary clothes, such as jeans, drill shirts and shorts, trousers and socks that lack protective qualities designed for the risks of the taxpayer’s work are not protective clothing.

For more information, refer to Taxation Ruling TR 2003/16 – Income tax: deductibility of protective items

Laundry expenses

The taxpayer can claim the costs of washing, drying and ironing eligible work clothes. These costs can include laundromat expenses.

The taxpayer must have written evidence – for example, diary entries and receipts – for their laundry expenses if:

  • the amount of their claim is greater than $150, and
  • their total claim for work expenses exceeds $300 – not including car and meal allowance, award transport payments allowance and travel allowance expenses.

Self-education expenses

This question is about self-education expenses that are related to the taxpayer’s work as an employee, and that they incur when they do a course to get a formal qualification from a school, college, university or other place of education.

To claim a deduction for self-education expenses, the taxpayer must have met one of the following conditions when they incurred the expense:

  • the course maintained or improved a skill or specific knowledge required for the taxpayer’s then current work activities
  • they could show that the course was leading to, or was likely to lead to, increased income from their then current work activities, or
  • other circumstances existed which established a direct connection between the course and their then current work activities.

The taxpayer cannot claim a deduction for self-education for a course that:

  • relates only in a general way to their current employment or profession, or
  • will enable them to get new employment.

Other work related expenses

Other work related expenses you may be eligible to claim are:

  • Union fee and subscriptions to associations
  • Depreciation on laptop, computer etc.
  • Overtime meals
  • Seminars, conferences or education workshops
  • Books and journals
  • Telephone and mobile
  • Home office expenses

Gifts and Donations to eligible organisation for more than $ 2 are deductible

An eligible organisation is an organisation that is listed in the tax law, or has been endorsed by the ATO, as a deductible gift recipient.

  • certain organisations or charities which provide help in Australia
  • an approved overseas aid fund
  • a school building fund
  • an approved environmental or cultural organisation.
  • Natural disaster donations.
  • Workplace-giving
  • Deductions for contributions relating to fund-raising events
  • Contributions and gifts to registered political parties

Expenses incurred by the taxpayer for managing their own tax affairs

These include expenses relating to:

  • preparing and lodging tax return and activity statements
  • travel, to the extent that it is associated with obtaining tax advice – for example, the travel costs of attending a meeting with a recognised tax adviser
  • appealing to the Administrative Appeals Tribunal or courts in relation to tax affairs

The taxpayer cannot claim for the cost of tax advice given by a person who is not a recognised tax adviser.

Other Deductions

  • Income protection, sickness and accident insurance premiums.
  • Personal superannuation contributions ifthey were fully self-employed and not working under contract principally for their labour