According to recent press releases from the Tax Office, there will be more than 1 million Australian taxpayers being contacted about their 2017/18 tax returns…. and you’re not alone if the thought of a call from the Tax Office makes you a little nervous! The latest estimate suggests that errors and fudging in tax returns costs the Government $8.7 billion per year.
Some lodged returns will be queried because taxpayers have not included all their income, others will be because there are claims for work related expenses which fall out of the normal range or category for their specific industry.
The secret to keeping on good terms with the ATO is making sure you claim all the deductions to which you are entitled BUT also having all the necessary documentation just in case they come knocking on your door. Receipts, receipts, receipts and this can’t be stressed too much!
Work related expenses fall into a few general categories, and these are…
Motor vehicle – if you use your own motor vehicle, you can claim trips such as between work sites; to conferences and training venues; to client premises; etc. You can’t claim travel between work and home even if you’re on-call or working outside of your rostered hours.
Travel – You can claim fares and accommodation while you are away on business. You can’t claim these expenses if your employer is paying or reimbursing you for the travel. You also can’t claim for any personal part of the trip (for example, if you’ve decided to extend your stay over the weekend, that’s on your own purse and not deductable).
Clothing – You can claim for uniforms which have a corporate logo and are compulsory to wear. You can also claim for protective clothing such as lab coats, sunscreen, steel capped boots etc where required. You can’t claim for clothing which is the same as normal street wear, even if your employer requires you to wear it. For instance, if you are expected to wear any type of navy pants and brown boots as part of your employer’s corporate image but there is no business logo on your clothes, they are not a valid work-related expense. You can claim for the cost of laundering where the clothing is deductible. But there is no standard deduction.
Self Education – You can claim the cost of undertaking further study providing it is related to your current position. You can’t claim the cost of studying if it is in a completely new field. So as an example, a teacher can claim the cost of upgrading their Bachelor degree to a Masters. They couldn’t claim for the cost of obtaining a degree in a completely new field such as Medicine.
Other – This everything else which may be considered a work-related expense and includes subscriptions, telephone, internet, working from home and maintaining a home office, equipment, professional associations, professional development, stationery etc. The rule of thumb is that the expenditure must relate to your income-producing activities (ie job or business).
To stay on the right side of the Tax Office you need to remember these rules:
- You must have a receipt. If the item costs less than $10 and it isn’t practical to keep a receipt, you can maintain a diary which details the date incurred, how much and what it was for.
- If an expense is used for both business and personal purposes, you can only claim the part which relates to work and be able to justify how it was calculated. For example, if you are claiming electricity, you must be able to justify how you have split the costs between work and home. This especially applies to telephone and internet costs which will often have some personal portion.
- The expense must be related to your job.
- There is no such thing as a standard deduction. If you are claiming laundry, you must be able to justify why you have claimed an amount.
- If an item of equipment costs more than $300, you cannot claim the purchase amount outright. Instead it must be claimed over multiple years (depreciated).
- You cannot claim and expense if your employer has already paid for it or has reimbursed you.
Do you have further questions about your specific occupation and what’s an allowable work-related deduction? I’m more than happy to chat with you and offer a FREE 30 minute initial consultation. You can easily book online here and I look forward to helping you sort your finances!