OK, so 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.
This can help reduce your taxable income and that boosts your tax refund.
Tax deductions include work-related expenses like the costs of buying uniforms, tools and travel for work.
Since COVID arrived, now more people work from home and that means many people can claim some home office expenses as tax deductions.
Other types of deductible expenses include the interest paid on investments, rental property expenses, some insurance policies and charity donations.
Do I get all the money back if I buy something that’s tax deductible?
The simple answer is no! 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.
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 tax deductions work.
- If you earn $65,000 a year you and 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 $2393.
- In other words, your tax deductions get you an extra $1260 in your tax refund when you lodge your tax return.
Important Note: The amount of additional tax refund your deductions get you is not a fixed 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.
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?
Frequently Claimed Tax Deductible Expenses
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!
#1 for This Year:
Home Office Expenses
Do you sometimes work from home? Have you had to work at home because of Covid in the past year?
Learn the difference between Occupancy Expenses and Running Expenses, as well as the new method brought in by the ATO to help make things easier.
But wait! There are many more work-related tax deductions
▶️ Click Here: Check out the different types of work-related tax deductions
- How To Claim Work-Related Car Expenses
- How To Claim Work-Related Phone Calls And Expenses
- Work Uniform Expenses
- Work-Related Travel Expenses – What Can You Claim?
- Can I Claim My Laptop as a Tax Deduction?
- Can You Claim Your Handbag Or Briefcase As A Tax Deduction?
- Claiming Your Self-Education Expenses As A Tax Deduction
- Ironing Out Laundry Expenses
Job Specific Tax Deductions
▶️ Click Here: Tax deductions for your profession
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.
Other Tax Deductible Expenses
There are so many more ways to pay less tax!
Work related tax deductions are the only deductions you might be eligible to claim. Take a look at these other deductions and see if any apply to you. We’ve got info on everything from side gigs to rental properties and everything in between.
Ride Share Partners
Are you in the ride share business? If you’re a ride share partner for Uber or any other ride car company, it’s important that you know the rules about GST and which of your expenses are tax deductible
Gig Economy Expenses
Making some extra cash on the side is easy these days, but be sure you know what to do about your tax deductible expenses.
Sole Traders and Freelancers
Whether your self-employed full time, or just do a bit of freelancing on the side, there are a lot of tax deductions you can claim to help boost your refund.
Do You Donate To Charity?
If you donate to charities or other institutions, you may be able to claim those donations on your tax return. Find out what types of donations are deductible here:
Rental Properties and Holiday Lets (including Airbnb)
Do you own a rental property or a holiday let? If so, there are a lot of expenses to take into consideration. The good thing is, many of these expenses are deductible so can be claimed on your tax return. Just make sure you don’t miss any – or try to claim when you can’t.
#1 Record Keeping
Your key to a better tax refund
Don’t lose your cash to the ATO. Keep records of everything you want to claim each year. Here’s what you need to know:
