With the end of the financial year fast approaching, it’s time to turn your mind to maximising work-related tax deductions.
Broadly speaking, to determine the deductions you can claim against your taxable income you need to keep one thing in mind, said Elinor Kasapidis, CPA Australia’s in-house tax expert.
“Anything you claim as a deduction has to be related to your work. It must help you either maintain your job [or business] or improve your job,” Ms Kasapidis said.
So, if you pay for something you need to use for work and your employer does not reimburse you for it, you can claim it as a tax deduction.
What can and can’t be claimed
If you went back to the office and the dog destroyed your couch while you were out because he missed you after two years of working from home, can you claim a new couch?
No. You can’t claim those costs because it is something you will be using privately, not for work.
If you are working from home and need to upgrade your wardrobe (new Ugg boots and tracky dacks for example), you can’t claim them as a work-related expense, either.
That’s because while you may wear them while working, they can be used any time and you would likely need them anyway.
The same goes for clothes you wear to work. Unless you need particular protective clothing or uniforms for your job then you can’t claim work clothing as a tax deduction.
That’s because you can wear it any time, at work or for leisure.
“So unfortunately that beautiful new suit you may be wearing is not a tax deduction,” Ms Kasapidis said.
The same goes for decor that makes your home office look beautiful during Zoom meetings – it’s not a tax deduction.
That’s because it can be enjoyed any time and is not a work necessity.
You also can’t claim Tim Tams or things you might like to snack on during the work day, even if the boss provides them in the workplace.
That’s because the tax man takes the view that you need to eat regardless of whether you’re working, so food is not a work-related expense.
Home office expenses
During the pandemic and into the current financial year, anyone working from home has been able to claim an 80-cents-per-hour tax deduction as an overall expense rather than making individual claims for different items.
“That is to cover your electricity, phone costs, the depreciation on the computer or other equipment you use for work, office furniture and stationery,” Ms Kasapidis said.
All you need to do to make the claim is to keep a record of the number of hours you work at home.
This is generally a good way of claiming home office expenses, but there could be times when it pays to make a direct claim for office equipment.
“If you have spent a lot of money on equipment it might be best to claim depreciation on the actual costs rather than using the 80c method,” Ms Kasapidis said.
That is because the depreciation schedule the ATO allows for office equipment might give you a larger deduction.
But don’t forget that if you claim for costs like office equipment, phone bills or internet expenses, then you must only claim a deduction on the percentage that is used for work.
For example, if 25 per cent of your phone usage is work-related and 75 per cent is for other purposes then you can only claim 25 per cent of your phone bill.
Another option is to claim 52 cents per hour for working from home.
“Although that’s a lower deduction than the 80c method, you can in addition claim the work-related proportion for things like home internet, mobile phone and depreciation on technology used for work,” said Mark Chapman, director of tax communications for H&R Block.
“When you take those factors into account, the 52c rate is the more effective one to choose.”
However, if you are looking at using the 52c rate or the actual cost method you should speak to your taxation consultant or accountant to help determine which is the most advantageous path to take.
“Usually the 52c rate will produce the best outcome,” Mr Chapman said.
If you’re travelling for work you can claim the costs incurred as a tax deduction.
That means transport fares, accommodation or car expenses.
If you want to claim food costs, talk to your tax consultant as it can be complicated.
You can’t claim the costs of getting to and from work or your place of business, but you can claim for trips taken from your workplace to see clients or perform work-related duties.
As for car usage, there are three ways to make a claim.
“You can claim 72c per kilometre, you can claim for up to 5000 work-related kilometres, or you can keep a log book for 12 continuous weeks and claim a percentage of all kilometres as business expenses,” Mr Chapman said.
Remember, however you choose to claim work-related expenses, you need to make sure you have the paperwork to back up your claims if the ATO asks.