Tax deductions are the number-one way to increase your tax refund – but how do tax deductions work?
First things first, lets get rid of a common misunderstanding about tax deductions:
Tax deductions mean, you get the whole cost back from the ATO when you lodge your tax return.
Tax deductions can reduce your “taxable income” and that means, you get part of the cost back for deductible items.
Most tax deductions are for work-related expenses. But deductions can also be for things like insurance, tax agent fees, charity donations and rental property expenses.
You claim these expenses at tax time and the deductions are subtracted from your taxable income. That, in turn, reduces the amount of tax you need to pay.
Below we cover some common “refund-boosting” tax deductions, plus some important advice about getting the tax refund you deserve without risking ATO trouble.
Tax deductions are easy to claim if you’re prepared and know what you’re eligible for, so let’s give you an idea about how to claim tax deductions and how much you could get back in your tax refund. The following items correspond with sections on the Etax tax return. You simply select, fill in and supply receipts/records for any tax deductions that apply to you.
Work-related car expenses
If you use your car for work i.e. drive between different offices, visit clients and/or transport goods (to name a few) you are likely to be able to claim the personal cost of using your car on your tax return, at this section.
The first thing to do is select the method you’re going to use to claim car expenses; the cents per kilometre method or the logbook method.
Work-related travel expenses
Travelling for work is very common these days. If you personally paid for something during your work-related travel and you haven’t been reimbursed by your employer, you may be eligible to claim a tax deduction. If you receive an allowance from your employer for work-related travel that is included on your PAYG as assessable income, you can claim travel and accommodation expenses up to the allowance amount, without needing to keep records. You must be able to justify expenses if requested and will need to provide evidence of any expenses over the allowance amount.
Examples of items you can claim are;
- Overnight hotel stays while on a work trip
- Car hire charges
- Tax fares
- Train and bus fares
- Food when staying away from home overnight
Work-related uniform, occupation specific or protective clothing
Many workplaces require staff to wear particular clothing, such as a uniform or protective footwear.
Sometimes this is for a professional appearance and to show off the brand of a business.
Sometimes it is for safety and protection.
If you’re in a role where you must wear;
- a uniform (with a logo)
- protective clothing
- protective shoes
- glasses, goggles, gloves etc.
- high-vis clothing or
- safety equipment
…then you’ll be able to claim a tax deduction for any expenses you’ve incurred. This also includes the laundering and dry cleaning costs for these items.
Tip: Ensure you keep receipts for any purchases and make note of how often you wash your uniform. This will help you determine what laundering you can claim. We’ve also got two blogs: one for Tradies and another for Freelancers that may help you determine additional expenses here.
Work-related self-education expenses
Self-study is a great way to improve your career and increase your skill set. Making the decision to further your education while working in the area of your study also comes with the advantage of claiming back some of your study-related expenses.
Tip: It’s important to remember you’ll need to be studying an area that relates to your current role (not something you’re aspiring to do) in order to claim tax deductions.
Tax deductions for gifts or charitable donations
If you’ve made a donation this financial year to a registered charity, and have receipts to prove your donations, this is the section to add your receipts to. You’ll need to confirm that your donation is to a registered charity, as they are the only organisations with eligibility to offer tax deductible receipts.
Tax agent fees
You can claim expenses that relate to managing your taxes, including the tax agent fees you pay for lodging your tax return.
You may also be able to claim back tax reference books, quantity surveyor reports and any interest charges from the ATO, if applicable.
Other work-related expenses
In many jobs and roles, you can end up spending money on items that are 100% related to your job. When that happens, you shouldn’t be paying tax on those expenses. That’s why you claim them as tax deductions.
Other work-related tax deductions you can claim can include:
- Union fees
- Stationery, notebooks, tax books, journals and trade magazines
- Tools and equipment (such as home printers, ladders etc.)
- Computers, laptops and software (if you work from home or are required to purchase/subscribe on behalf of your job.)
- Telephone, internet and home office expenses (if you work from home.)
- Mobile phone costs (see this blog post about claiming work-related phone calls
Tip: You can snap and upload receipts straight into your online tax return at etax.com.au. When your Etax Accountant reviews your return they see your deduction receipts right there, and help you leave out ones that aren’t eligible.
To learn more about tax deductions specifically for your type of job, visit the Etax blog for detailed tax guides.
For a tax-time checklist that’s tailored to your type of income and deductions, visit the tax checklists page.
It’s easy to add tax deductions to your Etax tax return
We’ve made it even easier this year to add in your tax deductions. Simply select the deduction types that are relevant to you and their sections will appear in your return below. Fill them out and upload your receipts directly into each section.
Tip: You can snap and upload receipts directly from your phone throughout the year, using the add deductions section on your welcome page.
Are you New to Australia?
Hop over to our Tax in Australia page to get yourself up to speed with everything you need to know about Australian tax.