This article was originally published 21 January 2021

It doesn’t matter who you are, most Australians hope to get some money back from the Australian Taxation Office (ATO) when they lodge their annual tax return.

While bigger companies are likely to have a team of accountants working on their tax reporting, many individuals and small businesses manage it themselves. Before you begin putting your tax return together for the financial year, get to know the tax deductions you may be able to claim.

What is a Tax Deduction?

You can claim a tax deduction for some expenses you incur while working. The expense subtracts (deducts) from your taxable income to lower the amount of tax you pay. Tax deductions are often work-related expenses, but may also include other items like accountant fees or donations of $2 or more to eligible charities.

The ATO points out that to claim a deduction for a work-related expense as an employee:

  • you must have spent the money yourself and weren’t reimbursed
  • the expense must directly relate to earning your income
  • you must have a record to prove it (usually a receipt)

To claim a work-related deduction as a small business:

  • the expense must have been for your business, not for private use
  • if the expense is for a mix of business and private use, you can only claim the portion that is used for business
  • you must have records to prove it

Regardless of whether you’re an employee or a small business, you’re entitled to claim deductions for expenses that relate directly to earning your income, says Joanne McCauley, Managing Partner at Jigsaw Tax & Advisory, a CPA firm that provides business tax and advisory services to small businesses. Be aware that what you can claim will depend on your circumstances, so she recommends seeking professional advice from your registered tax professional first.

“I have certainly seen some imaginative linkages between business income and expenses over the years,” she says. “If audited, you need to convince the ATO that the claim is legitimate, so if the claim is a little unusual, you need a good argument.” In other words, you need to make sure you are eligible to claim it.

Given that the definition of what can be deducted is so broad, sometimes it’s better to consider what you can’t claim, she adds. “Costs for items like [acquiring or renewing] your driver’s licence cannot be claimed, or relocation expenses if you move for [an existing or] new job.” 

To help, we’ve compiled a list of some of the tax deductions you may be able to claim – but don’t forget to talk to a registered tax professional if you’re unsure. You can also check the:

Tax Deduction Tips for Employees

It’s worth checking if you are eligible to claim common tax deductions.

1.   Claiming Working From Home Expenses

So that fancy new sit-stand desk, ergonomic mouse/keyboard combo or second monitor that has changed your working-from-home life is potentially claimable.

For this tax year 2022-2023, the 80 cents an hour shortcut method to cover expenses no longer applies, leaving two methods to choose from to calculate your working from home expenses. Take the time, or consult a registered tax professional, to work out which method applies to your circumstances and then determine the one that gives you the best outcome.

The revised fixed rate method:

Available for the tax years from 1 July 2022, this allows you to claim 67 cents for each hour you work from home during the year. The 67 cent per hour rate includes the total additional running expenses you incur for:

  • phone and internet usage
  • electricity and gas (energy expenses) for heating, cooling and lighting 
  • stationery and computer consumables, such as printer ink and paper

You can’t claim an additional deduction for any of these expenses if you choose this method. But the 67-cents-per-work-hour does not include the decline in value of work-related equipment such as computers or office furniture, so the work-related use of these items can be calculated and claimed separately.   

Note: To claim a deduction using this method, you will need records of the actual hours you worked from home - kept at the time they occur. You also need evidence for the expenses covered by the rate that you incurred, e.g. if you incurred phone and electricity expenses keep one bill for each expense, as well as records for items you claim as a separate deduction.

The actual cost method

Using the actual cost method, you claim the cost or decline in value of each expense. To do this you must have detailed records which show the amount:

  • you spend on expenses
  • you spend on depreciating assets you buy and use while working from home
  • of the work-related use for your expenses and depreciating assets.

And don’t forget, if you purchase equipment or tools for work that cost more than $300, you won’t be able to claim the full amount immediately. For these items, you claim the deduction over a number of years which takes into account the life of the asset and the number of days during the year that you owned and used it for work purposes. For example, if you buy a laptop for $2,000 on 30 June this year and use it 100% for work purposes, you get a deduction of about $3.00 because you didn’t own the asset for many days during that financial year. However, in this situation your deduction for the next financial year would be higher as you owned the asset for longer during that year.

Your registered tax professional can help you with your working from home expenses calculation, or if you lodge yourself, use one of the ATO calculators available on their website.

2. Claiming Mobile Phone Calls

If you’re using your personal phone for work purposes, you can generally claim the work-related portion as a tax deduction. To do so, make sure you keep the phone bills as well as track your work-related calls and private calls to work out your percentage of work-related use. Other possible claimable expenses include internet usage. But beware: if your boss reimburses you for mobile calls or your internet, you can’t claim it. And if you are working from home and use the 67 cents an hour revised fixed rate, you cannot claim these expenses as they are already included in the rate.

Remember: you need to have spent the money yourself and haven’t already been reimbursed to claim a deduction.

3. Claiming a Work Bag

If you use a bag for work purposes, such as carrying a laptop, tablet, phone, calculator or anything else you need to do your job, you may be able to claim a tax deduction for the cost of the bag, says H&R Block’s director of tax communications, Mark Chapman. Be careful though: you’d struggle to claim that new Gucci clutch, he warns. “The handbag needs to be fit for work purposes, like carrying a laptop, and actually be used for work purposes.”

4. Claiming Accounting Costs

You can claim accounting costs. If you went to see a registered tax professional to lodge your tax return last year, you can claim the expenses. Make sure you keep the receipt.

5. Claiming Membership Fees

If you’re part of a professional organisation, such as a union or industry body that relates to your profession and you pay fees, you can claim these fees as a tax deduction.

6. Claiming Car Expenses

If you’re required to use your own car for work reasons, you may be able to claim the expenses as a tax deduction. But remember, you generally can't claim the cost of travel between your home and your regular place of work. The ATO has two options to calculate car expenses – you either use a logbook (kept for a continuous period of at least 12 weeks), or you can claim cents per kilometre. Make sure you check if you’re eligible to claim car expenses.

7. Claiming Travel Expenses

If you travel away from your home overnight in the course of performing your employment duties, you can claim travel expenses, such as meals, accommodation, fares and incidental expenses. Note: you can’t claim a deduction if the travel is paid for or reimbursed by your employer or another person. Receiving a travel allowance from your employer doesn’t automatically mean you can claim a deduction. You still need to show that you were away overnight, you spent the money, and the travel was directly related to earning your employment income.

8.  Claiming Study Costs

You may be able to claim your self-education and study expenses if it relates to your work. The study must have sufficient connection to your current work and not be used to get a new job. If you are eligible, you may be able to claim your course fees, stationery and depreciating assets. 

9.  COVID-Related Deductions

While many workplaces have gone back to normal and no longer have COVID-prevention practices in place, some occupations, particularly those in the healthcare sector, may continue to have changed conditions to their work environment due to the COVID. This means the deductions you can claim may change as well. For example, you may be able to claim a deduction for the cost of buying a face mask to wear at work if:

  • your employment duties require you and other employees to be at your place of work
  • a face mask is not provided to you by your employer, and
  • you need to wear a mask (this is likely to be the case where your duties bring you in close contact with other people, including clients, customers, or work colleagues)

To claim personal protective equipment, such as gloves, sanitiser or anti-bacterial spray, your work duties must either:

  • bring you in close contact with clients or customers
  • involve you cleaning a premise

SEE ALSO: Small Business Tax Breaks to Consider in 2023

Tax Deduction Tips for Business Owners

Small businesses may also be able to claim home-based business expenses, accounting costs, motor vehicle expenses and travel expenses and COVID-related deductions. You can claim a tax deduction for most expenses for carrying on your business, as long as they are directly related to earning your assessable income.

10. Claiming Insurance

If you pay for insurance premiums against loss of income, those amounts are also potentially tax deductible. “Bear in mind that doesn’t include life insurance, critical-care insurance or trauma insurance,” says Chapman. “It also excludes policies paid for out of your superannuation contributions.” Businesses could claim the costs of insuring their property and, if you run a business from home, you may be able to deduct a portion of your home insurance premium.

11. Claiming Office Supplies & Equipment

For small business owners, specialist equipment can be a legitimate expense. For example, if you're in hospitality or retail and invest in new POS (point-of-sale) equipment, it could be deducted. And while stationery and workspace supplies are things you probably think to deduct, remember other items like milk for the work kitchen are also possible deductions. You can get organised and schedule regular deliveries of milk and fruit for the next 12 months, which could also be claimed against your tax. However, employees working from home can’t claim their food, coffee, tea, milk and other general household items.

SEE ALSO: What is Fringe Benefits Tax and Do You Need to Pay It?

It Pays to Keep Tax Receipts Organised

Tax time tip: keep invoices organised

Receipts for a whole year’s worth of expenditure can seem pretty overwhelming, regardless of whether they’re digital or paper. If you keep paper records, simple document box files and expanding files can make a huge difference to prepping your return. Start a new box file or folder for each month, so when tax time comes around, everything is already filed in the one place. Remember, too, that you’re expected to keep files for five years from the date you lodge your tax return, whether you’re an employee or a business, so if you do have lots of paper records, archive boxes are just the ticket.

Another clever way to keep track of receipts is by digitising. You can photograph or scan the receipts to file on your computer. If space is an issue, use a separate hard drive or cloud software to manage the snaps. Or consider using online accounting software. Don’t forget, we can email you a copy of your receipt too – just ask one of our friendly staff at your local Officeworks.

There are many ways to keep your receipts and invoices organised for tax time, from physical filing systems to the free myDeductions tool in the ATO app, which is easy to use for employees and sole traders alike.

Don’t Forget! There Are Benefits to Claiming Tax Deductions

Reap the rewards of claiming tax deductions in your return.

If you’re wondering whether it's worth the effort of claiming, the answer is yes. Some of the claims might seem small but they add up pretty quickly.

For more information, check out the ATO website for what individuals and businesses can claim.

What To Try

* This is general information only and does not constitute taxation or legal advice. Other requirements under the tax law apply. Seek professional tax and/or legal advice to determine whether you are eligible to claim a deduction for any purchases.

SEE ALSO: Tax Return Tips to Get the Most Out of Your Return