The time’s approaching to lodge your tax return. Have you started thinking of any work-related expenses you paid this last financial year?
You may be able to claim some expenses as tax deductions and reduce your taxable income. Which means more money back in your pocket. Here at National Accounts, that’s something we love to see for our clients.
If you’re planning on claiming some of your work expenses back this year, here are some things you should know.
How do tax deductions work?
Most people are aware that tax deductions can help increase your tax refund. But not everyone knows exactly how that works.
Claiming a tax deduction doesn’t mean you receive that entire amount back from the Australian Tax Office (ATO) when you lodge your tax return.
Instead, the money gets deducted from your assessable income. So the total amount of income you pay tax on is reduced.
How to claim the most back on tax
You are entitled to claim deductions for some expenses incurred while working. These are known as work-related deductions.
To claim a work-related deduction, you must have a record to prove the expense and it must be related directly to your job. You must also have spent the money yourself and not received a reimbursement for the cost.
But that doesn’t mean that anything you spend at work is claimable. It’s important to understand which deductions you can claim, and which you can not.
Tax deductions for work-related expenses
Travel and vehicle expenses
If you use your car for work-related activities such as delivering stock or attending multiple workplace locations, then you are entitled to claim the travel expenses that relate to those work-related activities.
You can also claim accommodation expenses if you’re required to travel for work.
But driving to and from work in your car is not a claimable expense. Nor are minor tasks you do on the way to work, traveling home after overtime, or attending security call-outs at night.
Clothing and laundry expenses
Clothing that is specific to your occupation is considered a work-related expense and therefore claimable. For example, if you are required to wear a uniform at work that has your company’s logo on it, or if you need protective clothing and footwear in your occupation.
However, you cannot claim the clothes you buy to wear to work. Non-compulsory work uniforms may not be claimable either, so make sure you check your employer’s dress policy to find out if your uniform is compulsory. If it is, the ATO will view it as a work-related expense and you may be able to claim both its purchase and ongoing laundering costs.
This last year has certainly seen many more people work from home than usual due to the COVID-19 pandemic. If you have worked from home, there are certain home office expenses you may be able to claim.
These include –
- Internet and mobile phone use
- Stationery, printer ink and other consumables
- Equipment such as computers, furniture, phones and printers
Tools and equipment
If you require tools for work purposes, you can claim a deduction for up to 100% of the cost depending on their ratio of work vs private use. Generally, you can claim an immediate deduction for items that cost $300 or less.
For items that cost over $300 or form part of a set, you can claim a deduction for their decline in value over time, and you can also claim the cost of insuring and repairing them also.
Tax preparation expenses
That’s right, professional fees you pay to an accountant to prepare your tax is actually claimable on your next tax return. You can also declare your travel costs for getting to and from your tax appointment with a registered accountant also.
The ATO wants you to get it right, and so do we! So they make it easy for you to have your tax done by a professional. The way we see it, getting your tax done by an accountant instead of doing it yourself (and potentially making a costly mistake) is a no-brainer.
Where to get specialist advice
Nobody likes paying more tax than they have to, which is why it’s important to make sure you’re not missing out on any deductions at tax time.
At National Accounts, our tax accountants can help you work out what deductions you can make, and which calculation methods are going to work more in your favor when reporting to the ATO.
Are you a smaller sized business looking for accounting services? We offer small business accounting!