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