With the ATO cracking down on work-related expenses, we want to make sure you’re up-to-speed on what you can and can’t claim, and the proof you’ll need to back yourself.
When completing your tax return, you’re entitled to claim deductions for some expenses, most of which are directly related to earning your income. To be eligible to claim a work-related expense:
- it must be job related
- you must have spent the money yourself and weren’t reimbursed
- you must have a record to prove it (there are some limited exceptions).
Note: Where expenses relate to both work and personal use, only the work-related portion can be claimed. How much of the expense is allowed as a tax deduction will depend on the extent the expenses are incurred in earning the person’s assessable income.
What’s new for 2017/18 tax deductions
From 1 July, employees making personal super contributions will generally be able to claim a tax deduction for these contributions. Please note, eligibility criteria must be met.
Our top work-related tax deductions
Note: our checklist is a guide only and is not an exhaustive list of all deductions available – this may vary depending on individual circumstances.
- Using your own car: (including a car you lease or hire) in the course of performing your job as an employee, it is treated as a car expense.
- Someone else’s car: Used for work purposes, you may be able to claim the direct costs (such as fuel) as a travel expense.
- Cost of travel between home and work: Most people can’t claim the cost of travel between home and work because this travel is private.
When you can claim your vehicle:
● while you’re carrying bulky tools or equipment
● travelling to attend conferences or meetings
● delivering items or collecting supplies
● if you have a second job, travelling between two separate places of your workplace
● travelling from your home to an alternative workplace and then to your normal workplace or directly home (e.g. if you travel to a client’s premises)
Clothing, uniforms, footwear and protective items:
- Occupation specific clothing: You can claim the cost of buying and cleaning occupation-specific clothing, protective clothing and unique, distinctive uniforms.
- Clothes no specific to your occupation: You can’t claim the cost of purchasing or cleaning clothes you bought to wear for work that are not specific to your occupation, such as a bartender’s black trousers and white shirt, or a suit.
- You can’t claim the cost of purchasing or cleaning ordinary clothes you wear for work that may also protect you. For example, you can’t claim for normal, closed shoes, even though you wear them to protect your feet.
- You can’t claim the cost of purchasing or cleaning a plain uniform.
- Shoes, socks and stockings can never form part of a non-compulsory work uniform, and neither can a single item such as a jumper.
- You can claim the costs of washing, drying and ironing eligible work clothes, or having them dry-cleaned.
- Sun protection: claims for sunglasses, hats and sunscreen allowed for taxpayers who work outside.
Occupation specific clothing means:
● Is not everyday in nature
● Allows the public to easily recognise your occupation – such as a chef’s uniform
Protective clothing includes:
● Fire-resistant and sun-protection clothing
● Safety-coloured vests
● Rubber boots for concreters
● Steel-capped boots, gloves, overalls, and heavy-duty shirts and trousers
● Overalls, smocks and aprons you wear to avoid damage or soiling to your ordinary clothes during your income-earning activities.
Work uniform means:
● Clothing is unique if it has been designed and made only for the employer
● Clothing is distinctive with the employer’s logo
● Clothing is not available to the public
Home office expenses:
- Devices for work purposes: If you are an employee and required to use your computer, phone or other electronic device for work purposes, you may be able to claim a deduction for your costs.
- Performing work from a home office: If you perform some of your work from a home office, you may be entitled to a deduction for the costs you incur in running it.
- Device depreciation: Electronic devices and running costs are fully deductible if $300 or less. If more than $300, it must be depreciated.
- Home office occupancy expenses: As an employee, generally you can’t claim a deduction for occupancy expenses, including rent, mortgage interest, council rates and house insurance premiums.
Electronic devices include:
● Smart phones
Running costs include:
● Phone and internet expenses (must exclude the percentage of private use)
● Utility expenses (heating, cooling, power and lighting) – the ATO provides a set-rate per hour
● The costs of repairs to your home office furniture and fittings
● Cleaning expenses for your office area only.
What you can claim:
- Meal expenses when travelling overnight for work-related purpose.
- Overtime meals: If allowance received under award.
What you can’t claim:
- Meal expenses during standard working hours (when not travelling overnight).
- Practicing certificate: Applies to professional employees.
- Professional association/membership fees
- Professional library: (books, CDs, videos etc) Established library (depreciation allowed).
- Professional library – New Books: Full claim if cost $300 or less (includes a set if total cost is $300 or less).
- Professional library – New Books: Depreciation if cost over $300 (includes a set if total cost is more than $300).
- Professional indemnity insurance
- Claims for fees, books, travel (see below) and equipment etc. only allowed if there is a direct connection between the course and the person’s income earning activities. No claim for the first $250 if course is undertaken at school or other educational institution and the course confers a qualification. However, the first $250 can be offset against private expenses, eg. travel, child minding fees, etc.
- Seminars: Including conference and training courses if sufficiently connected to work activities.
- Stationery (diaries, log books etc.):
- Subscriptions / Publications: If a direct connection between publication and income earned by taxpayer.
Tax agent fees:
- Fees to prepare your tax return – deductions can be claimed in the income year the expense is incurred.
- Travel and accommodation expenses: if you travelled to a tax agent or other recognised tax adviser to obtain tax advice, have returns prepared, be present at audit or object against an assessment.
- Cost of other incidentals – if incurred in having tax return prepared, lodging an objection or appeal or defending an audit.
- Technical and professional publications directly related to managing your tax affairs
Tools, equipment and other assets:
Work related only or if used for both work and private purposes you can only claim the work related portion.
- tools and equipment under $300: For items that cost $300 or less you can claim an immediate deduction for their cost.
- tools and equipment exceeding $300: For items that cost more than $300 you can claim a deduction for their decline in value.
- tools and equipment repairs: The cost of repairing and insuring can be claimed.
Examples of tools, equipment, assets:
● Computers and software
● Desks, chairs and lamps
● Filing cabinets and bookshelves
● Hand tools or power tools
● Protective items, such as hard hats, safety glasses, sunscreens and sunglasses
● Professional libraries
● Safety equipment
● Technical instruments
Records you need to keep
During the financial year you’ll receive documents that are important for doing your tax, such as payment summaries, receipts, invoices and contracts. Generally, you need to keep these for five years from when you lodge your tax return in case the ATO ask you to substantiate your claims.
Records you need to keep include:
- Payment summaries from payers, including your employer and the Department of Human Services/Centrelink
- Statements from your bank and other financial institution showing the interest you’ve earned
- Receipts or invoices for equipment or asset purchases and sales
- Receipts or invoices for expense claims and repairs
- Log book for motor vehicles
Want to know what you can do, in-addition to your work-related expenses, to reduce your tax payable?
Common strategies include:
- Income splitting
- Negative gearing
- Buy more tax-deductible items
- Donate to a registered charity
Tax accounting considers all your available tax deductions and assess your potential for reducing the amount of tax payable each financial year. While we have only focused on work-related expenses, both investing and financial structuring may offer further deductions.
Want to book your tax return with our chartered accountants? Get in contact with us now at firstname.lastname@example.org or book an appointment online.