What is a tax deduction?
A tax deduction is a something you paid for, out of your own pocket, that can be listed on your tax return.
Deductions can help reduce your taxable income, which boosts your tax refund at tax time.
Tax deductions include work-related expenses like the costs of buying uniforms, tools and travel for work.
How do tax deductions work?
First of all, you don’t have to be an expert on this. If you use Etax, the website helps you find the deductions you can claim, plus you can chat with an accountant who’s on your side, helping get deductions right. That said, it’s good to know a little bit about deductions because it helps you remember what receipts to collect all year long.
If you think this is confusing, you are right. Australian taxes are very complicated. Here is a quick example to explain how it works:
- If you earn $65,000 a year and you paid $14,000 of tax during the year, your tax refund would be $1,133.
- However, if you spent $3,500 throughout the year on work-related expenses, your taxable income is reduced to $61,500.
- That means you only have to pay tax on $61,500 of your income, and any extra tax you already paid during the year is added to your refund.
- At the time of writing this equals $1,260 which is added to your original tax refund of $1,133 meaning your tax refund increases to $2,393.
- In other words, your tax deductions get you an extra $1,260 in your tax refund when you lodge your tax return.
Important Note: The extra money you receive in your tax refund from deductions is not a set amount. It changes as your income increases or decreases. E.g for someone earning $35,000, their $3,500 of tax deductions increases their refund by $735.
On the other hand, for someone earning $110,000, their $3,500 of tax deductions increases their refund by $1,470.
It’s important to remember that you don’t get ALL the money back that you spend on tax deductible items or services, but you do get a percentage. Your taxable income is reduced by the amount you spend. This means, you pay tax on less of your overall income, and your refund goes up.
Read on for the full lowdown on what to claim to get the best possible tax refund, this year – and every year!
What tax deductions can I claim?
Do you travel as part of your job, buy your own tools, equipment or uniforms, use your own car for deliveries, and fund these costs out of your own pocket? If so, you need to make sure you’re completely up to speed on what you can claim back at tax time. It could be $1000s! Below we’ve listed a few of the deductions you could claim on your tax return.
Working from home tax deductions
Do you sometimes work from home? Have you had the opportunity to work at home in the past year? With many Australians now working at least a portion of their time at home, it’s important to get your work from home deductions right. Learn the difference between the Actual Cost Method and the Fixed Rate Method.
Work-related travel expenses
If you travel even a short distance for work, excluding to and from home, you could be claiming work-related travel expenses. This includes using your car, public transport, airfares, parking, and more!
Investment property tax deductions
The cost of living has increased for everyone, including landlords. Knowing which rental property tax deductions you can claim is an important part of owning an investment property.
Tax deductible donations
Have you made a donation to your favourite charity this financial year? You might be able to claim it as a tax deduction on your next return. Find out if your donation is tax deductible.
Super contribution tax deduction
You may be investing money into your super to benefit your retirement, but did you know you can benefit financially from your personal super contributions now? Claim them as a tax deduction on your tax return to pay less tax!
Uniform and laundry tax deduction
If you must wear a uniform for work with a company logo, you can claim a portion of the cost of washing your uniforms.
Job Specific Tax Deductions
Are you a Nurse, a Teacher or in Hospitality? Whatever your job, we’ve got your deductions covered.
Each job has different tax deductible expenses. Click on the guide which relates to your job and we’ll tell you what expenses you can and can’t claim.