2024 Guide to Tax Deductions in Australia

In this austrlia tax guide we examine the different tax deductions and expenses which should be accounted for when completing a tax return to ensure you pay the right amount of tax and claim back YOUR money for expenses which are tax deductable.

How do tax deductions work in Australia?

When submitting a tax return you are entitled to claim deductions for expenses incurred while working - known as work related deductions. To be able to claim work related deductions you must meet the following criteria:

• You must have record to prove it
• You must have spent the money yourself
• You must not have been reimbursed for the cost
• The expense must be related to your job

If the expense you are claiming is for both work and private purposes, you can only claim the work portion of the cost.

Understanding the different tax deductons you can claim

Vehicle and Travel Expenses

The most important thing to remember when it comes to work related vehicle and travel expenses is that you must keep records. This will make life a lot easier for you come tax time.

If you use your car for work you are entitled to claim the work related travel expenses that relate to the business costs of using your car to do your job. There are a number of methods you can use to claim the car expenses. You must own the car to claim under any of these methods and the record keeping requirement is detailed for each method.

Travelling to and from work on a daily basis cannot be claimed as this is considered as private travel.

You cannot claim the cost of normal trips between home and work because that travel is private even if:

• You do minor tasks on the way to work, such as picking up the mail
• You travel back to work for a security call out or parent teacher interviews
• You work overtime and no public transport is available to use to get you home

Work related clothing and Laundry Expenses

Do you need to wear a suit to work? Or perhaps you need to wear a uniform emblazoned with your company’s logo? Perhaps you work in a clothes shop and have to come to work wearing clothes bought in that store?

Whatever the case, you have to conform to your employers dress policy so there might be an expectation that you’ll be treated the same way by the taxman when it comes to claiming tax deductions for your work clothing.

Tax Deductions and expenses when Working from Home

If you carry out all or part of your employment activities from home, then some portion of the home office expenses can be claimed as a tax deduction. Ideally, you should have a room set aside as a home office. Whilst you do not need to have a room set aside for your home office claim, if you are using a room with a dual purpose , or a room shared with others you can only claim the expenses for the hours you had exclusive use of the area.

As with anything tax related keeping records for your home office is critical. If you work from home you may be entitled to expenses such as computers, phone or any other electronic devices you need for work. You can also deduct running costs for any electrical.

Expenses for Mobile Phone charges

If you use your own phone for work purposes, you can claim a deduction if you paid for these costs and have records to support your claims. If you use your phone for both work and private use, you will need to work out the percentage that reasonably relates to your work use. You can’t double-dip and claim for phone expenses that has been reimbursed by your employer.

Interest and Investments

Deductions can be claimed for expenses incurred earning interest, dividends or other types of investment income. For interest income expenses, you can claim account keeping fees for investment purposes. Something to be mindful of though is if you have a joint account, you can only claim your share of the fees.

For shares and dividends you can claim a deduction for interest charged on money borrowed to purchase shares. If the money borrowed was used for both private and income producing purposes you must portion it between each purpose.

Income Protection Insurance

Insurance premiums that you take out against loss of income can be included in your deductions. But don’t make the mistake of incorporating life insurance, critical care insurance or trauma insurance because these are not eligible elements for deduction. Policies paid for out of your superannuation contributions are also not allowed.

Self-Education Expenses and Deductions

Self-education expenses can be claimed if your study is directly linked to your work. The course you undertake must lead to a formal qualification that meets the below criteria:

• The course must maintain/improve skills and knowledge required in your current job
• Resulting in, or is likely to, an increase in your income

You cannot claim a self-education expense that does not have a significant enough connection to your current employment.

You can claim the following expenses in relation to your self-education:

• Accommodation and meals (if away from home overnight)
• Computer consumables
• Course or tuition fees
• Equipment repairs
• Fares
• Home office running costs
• Interest
• Internet usage (excluding connection fees)
• Parking fees (only for work-related claims)
• Phone calls
• Postage
• Stationery
• Student union fees
• Student services and amenities fees
• Textbooks
• Trade, professional, or academic journals
• Travel to-and-from place of education (only for work-related claims)

If an expense is partly for your self-education and partly for other purposes, you can only claim the amount that relates to your self-education as a deduction.