Deductions

Travel expenses can be broken up into three categories:

1. Travel between home and work

Generally, the travel between home and the normal place of work is not deductible. The taxpayer can claim travel expenses between home and work if the expenses directly connected with their work. The instances when they may be able to do this are:

• When the taxpayer has worked outside of normal work hours where work at home has started prior to undertaking travel.
• If the taxpayer are itinerant workers. In these instances, the taxpayer had a shifting place of employment and the expenses incurred to get to these places may be claimable.
• By taxpayers who are required to carry bulky tools or equipment that they used for work and incurred expenses to carry those tools or equipment around. However, these items are not deductible when the taxpayer carries them as a matter of convenience only.
• When the taxpayer had to travel to an alternate place of work on a temporary basis. In this situation, the taxpayer may be able to claim expenses such as meals, accommodation, and incidental expenses while travelling for overnight work (e.g. conference). If the travel does not involve an overnight stay, the taxpayer cannot claim for meals even if they received a travel allowance.

2. Travel between two places of work

The taxpayer may be able to claim the cost to travel between two places of work where the two places are related to some income producing activity.

3. Car related travel expenses

If you use your own car in performing your work-related duties (including a car you lease or hire), you may be able to claim a deduction for car expenses, however if the travel expense was partly private, you cannot claim that. There are two main methods to calculate car related travel expense and any one can be used:

• Cents per kilometre methodà Using a single rate, you can claim certain amounts for your car per kilometre used for work purpose. The maximum claim is up to 5,000 business kilometres per car per user if the two users use the same car for separate income producing purpose. You may need to show how you worked out your business kilometres.
• Logbook methodàYour claim will be based on the business-use percentage of the expenses for your car, where the expenses include the running costs and decline in value but not capital costs. To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period. The logbook period is a minimum continuous period of 12 weeks. You can claim fuel and oil based on actual receipts or the estimates of the expenses based on the odometer readings from the start and the end of the period you had the car during the year. For other expenses you need written evidence.

To find out more about travel expenses and what can be claimed and what cannot, visit:

• https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Transport-and-travel-expenses/Transport-expenses—trips-between-home-and-between-workplaces/,
• https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Transport-and-travel-expenses/Motor-vehicle-and-car-expenses/

You can claim a deduction for the cost of buying and cleaning occupation specific clothing, protective clothing and distinctive work uniform. Certain clothing items that are expected to last a number of years such as a barrister’s wig may be capital and subject to depreciation. To claim a deduction, you may need written evidence of the purchase of clothing and diary/receipts for the cleaning costs. If your claim amount for clothing purchase is greater than $150 and the total claim for your total work-related expenses are greater than $300, you are required to keep the written evidence for at least one month. You may also receive an allowance from your employer for clothing, uniforms, laundry or dry-cleaning. If you do, make sure you show the amount of the allowance on your tax return as it is assessable income. You can only claim a deduction for the amount you actually spent.

Types of Clothing that can be claimed:

Occupation specific clothing – Identifies the wearer as a person associated with a particular line of work, occupation or calling. For instance, a chef’s hat.

Protective clothing – Clothing that protects the wearer from a real risk of exposure to illness of injury. For instance, fire-resistant and sun-protection clothing.

Uniform – Must be sufficiently distinctive to an observer as clearly identifying the employee as working for a particular employer. You can claim compulsory work uniform, though if the taxpayer wants to claim non-compulsory uniform, their employer must have registered the design with AusIndustry.

Cleaning of work clothing:

You can claim costs of washing, drying, dry cleaning or ironing work clothes that are deductible, even if supplied by your employer. If these expenses however are reimbursed or cleaned by your employer, then you cannot claim them as a deduction. You must have written evidence, such as diary entries and receipts, for your laundry expenses if both:

• the amount of your claim is greater than $150
• the amount your total claim for work-related expenses exceeds $300 – not including car, meal allowance, award transport payments allowance and travel allowance expenses.

Self education expenses are deductible when you gain a formal qualification which allows you to gain or produce income in your current work activities. If the commerce course helps you to improve your current skills or knowledge in the accounting industry, and is likely to help you earn higher income or improve prospects of promotion in your current career as an accountant, then you may be eligible to claim some self-education expenses. However, if you are undertaking work which does not have sufficient nexus with your education, then those expenses are generally not claimable.

To find out more on which self education expenses you can and cannot claim, visit https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Self-education-expenses/

Travel expenses relating to self-education may be deductible when travel relates to income-producing activities. Some factors that may help determining deductibility are:

• Whether there is employer support for travel
• Clear evidence that the travel was devoted to upgrading information relating to income producing activities and whether this travel will help you to get a promotion and/or more income

Although you are attending a work-related seminar that will help you to upgrade your information to your current income producing activity and gain more income and/or promotion, visiting your family overseas is not work-related. In this case you will have to apportion some expenses between private purpose and work-related expenses. Private purpose expenses whilst you are travelling will not be deductible.

If you’re an employee who works from home, you may be able to claim a deduction for expenses you incur relating to that work. These can be additional running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home.

In some cases, if your home is your primary place of business and you have a genuine home office that is exclusively for business activities, you may be able to claim the expenses incurred from running your home office, however you cannot claim deductions for private costs. Some examples that may allow you to determine whether your home is considered a place of business include:

• a small business operator whose main office is in their home
• a tradesperson or craftsperson who has their workshop at home
• a doctor or dentist who has their surgery or consulting room at home.

To find out more on home-office expenses visit: https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/working-from-home-expenses/

Interest accruing on borrowed funds may be able to be deducted if the negative gearing purchase was a business asset or an investment rental property. To claim interest deductions, the income generated from the asset must have a nexus to income producing properties, and the reason for negative gearing must be a genuine one, then only will interest deductions able to apply.

A taxpayer can claim an immediate deduction on individual tools and equipment each worth up to $300 for business use. A laptop is generally worth more than $300, so it needs to be depreciated until for its useful life. Because some portion of the laptop is used for private use, it is important to apportion only the business use that is deductible. You should keep a logbook to monitor your private and business use for a period of at least four weeks, so that you can determine what portion is claimable.

You can only claim tax deductions on donations made to a deductible gift recipient (DGR). Donations made to non DGR charities are not deductible. To claim a deduction on a donation, the value of the donation must be greater than $2 and you do not receive a material benefit in return. Where you do receive a material benefit, it is called a contribution and for a contribution to be tax deductible:

• be made to a DGR
• be in respect of an eligible fundraising event
• be an eligible contribution
• comply with any extra conditions that apply to some DGRs.

Only individuals may be able to claim deductions on a contribution if it satisfies the criteria.

To find out more on deductions related to gifts and donations visit: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Other-deductions/Gifts-and-donations/

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Fees paid to a registered tax agent to manage your tax affairs are deductible. You can also claim costs associated with travel to the tax adviser.                         

For more information on deductions relating to cost of managing tax affairs visit: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Other-deductions/Cost-of-managing-tax-affairs