At this time of year, we are well into the 2018 tax return preparation season and many of you will be thinking about what tax deductions you can claim. Generally, any expenses incurred in relation to earning your income for the financial year are deductible (either immediately or over a period of time). In order to be able to claim deductions there are conditions that need to be met. You have to show that:

• The expense was incurred directly in relation to earning your income; and
• The expense is not private in nature.

We describe below some common tax deductions relating to individual taxpayers:

Work related car expenses

If you use your own car for work-related travel and you are not reimbursed for this by your employer, you can claim a deduction for the work-related portion of your car expenses. The two methods to claim this deduction are:

• Cents per kilometre – This method is based on the amount of work related kilometres you travelled during the year. You can claim 66c per kilometre driven up to 5,000km’s.
• Logbook method – This method is based on claiming a percentage of the operating costs of the car. The percentage is worked out by keeping a logbook for a consecutive 12 week period.

Travel Expenses

Travel expenses that are not reimbursed by your employer and are not private are deductible. These can include:

• Aeroplane tickets, accommodation and meals
• Train costs (from one work site to another)
• Work related taxi trips
• Parking Expenses

There are strict rules around substantiation of your travel costs, which dictate what records you must keep in order to be able to deduct the travel expenditure.

Internet and Telephone Expenses

The work-related portion of telephone and internet expenses is deductible. This is worked out by multiplying your total telephone or internet expense by your work-related use percentage. All invoices/receipts must be kept, along with a diary that captures your work related use over a minimum four week period. Unless you have more than one plan, the ATO will generally not accept that your phone or internet usage is 100% work-related!

Self-education Expenses

Self-education expenses are deductible if they:

• Have sufficient connection with your current employment;
• Maintain or improve the skills or knowledge you require in your current employment;
• Result in or is likely to result in an increase in your income from your current employment;
• Is not reimbursed or paid for by your employer.

Home Office Expenses 

If you work from home at any point during the year, you are eligible to claim the home office expense deduction. This is relating to the use of your home and furniture for work related activities. There are two methods to calculate your home office expense:

• Cents per hour Method – This method is based on a set rate of 45 cents per hour, for every hour you have worked from home. You need to be able to show the basis for how many hours you have worked from home, for example by maintaining a diary.
• Running Costs Method – This method takes the total eligible expenses you pay to run your home and apportions them based on the floor area of the space you use as a work station as a percentage of the total floor area of your house. Receipts must be kept for all items over $10, and a diary must be kept for all expenses under $10 (total of which cannot exceed $200). Generally, the cents per hour method is a much more practical option.

Clothing, laundry and dry-cleaning expenses

The cost of washing, ironing and drying eligible work clothing or protective clothing (including dry-cleaning) is deductible. You must have evidence (such as a diary) and receipts if the amount being claimed is greater than $150, or if you’re total deductions exceed $300.

Work clothing includes:

• Compulsory uniforms (General work clothing such as suits are considered to be private and are not deductible)
• Items of clothing with your employers logo

If no written evidence is required, you are able to work out your deduction based on a reasonable amount set by the ATO:

• $1.00 per load for only works related items; or
• $0.50 per load for a mix of work related and personal items.

Other Work Related Deductions

Other expenses you personally incur in producing your salary or other income can be deductible, such as:

• Purchase of a USB or hard drive for work purposes;
• Subscriptions to related magazines or journals;
• Purchase of virus protection for a work computer or tablet;
• The work-related portion of tools or equipment used for work (e.g. phone, laptop or tablet) – either immediately or over time;
• Office supplies (Stationary, paper, etc.);
• Professional association fees (union fees, institution membership fees, etc.).

Other deductions

The following expenses are specifically deductible:

• Fees paid to an accountant or tax agent to manage your tax affairs;
• Interest charged on money borrowed for investment purposes (please seek specific advise on this deduction);
• Donations to charities that are endorsed as a deductible gift recipient (DGR);
• Income protection insurance premiums that are not paid through your superannuation fund;
• Superannuation contributions you make personally (not from your employer) in certain circumstances (please seek specific advise on this deduction);

Record Keeping

While you are not required to submit documentation to the ATO with your tax return to support your claim, it is absolutely essential to maintain records to substantiate work-related and other expenses. These records need to be kept for five years from when you lodge your tax return. This can be done digitally or maintaining a folder with physical invoices for the financial year.

The ATO can request to see your records and it is not un-common for them to do so!