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Tax for Dummies: 11 Simple Deductions You Could Make
Posted on: 3 / 7 / 2018
tax time
Please note, the idea of this post is to give you an idea of things that you may be able to claim. The intent is to display factual data so you may be better informed. This should not be considered tax advice - you should seek out an accountant for that.

In 2016 The Guardian newspaper released a cheeky article titled “Do you pay more tax than Australia’s biggest companies”. It contained a calculator for you to punch in the tax you paid that financial year and quite literally see if you pitched in more than companies like Qantas, Origin Energy and ExxonMobil Australia (you know, the parent company of Mobil service stations) - all of whom paid no tax at all.
Articles like these inspire both fist shaking at our government’s refusal to tax the big end of town and a lingering feeling that you probably could have made a few more deductions yourself.

In this blog, we'll explain how tax deductions work, then walk you through the easiest tax deductions you can make.

After all, if there are legitimate deductions you can make, why not claim them? Kerry Packer put it in an interesting way:
What is a tax deduction?
A tax deduction is a way to pay less tax. If, once you’ve lodged all your deductions, you’ve paid more tax than you needed to you will get a tax refund for the amount you’ve overpaid.
So, what can you deduct? A whole slew of expenses you may have incurred on your quest to make money.

These are what accountants call “work-related deductions”, and unless the ATO says otherwise you must:

• Have records to prove that you spent money to make money (receipts)
• Have personally paid for those expenses
• Not have been reimbursed by your company
• Have incurred the expense because of your job

Deduction ideas starting to percolate in your brain? Read on to see the simplest deductions virtually anybody can make…
1. Vehicle and travel expenses
Most people vaguely know that they can claim some vehicle and travel expenses, but they aren’t sure about the nitty-gritty of what is and isn’t deductible.
You can’t claim the cost of travelling to and from work every day (not even if you run an errand on the way, sorry!) but you can claim the costs you incur when you use your car while performing your job (driving to meetings or picking up packages for your employer, for example).
To claim car-related travel expenses, you need to keep records of your work-related car use. There are two ways to track your claim:

- You can claim 66 cents per kilometre of work-related travel (this covers running costs and fuel) for up to 5000 km a year. You should keep a diary of your work-related journeys if you use this method.


- You can claim all expenses relating to the business use of your car as a percentage of its total running cost. To do this you’ll need to keep a log book for at least 12 weeks as well as all of your receipts. This is a more appropriate method of calculating your deductions if you travel more than 5000km a year for work.

If, however, your employer provides your car (even as part of a salary package) you can’t claim anything!

More info can be found here on the ATO's site. 
2. Clothing
If you have to wear occupation-specific clothing (a uniform with a logo, personal protective clothing or specific items mandated by your employer’s uniform policy that you wouldn’t wear in your day-to-day life), you can claim the costs of both purchasing and laundering your work clothes.
You can claim $1 per load (washing, drying and ironing) as well as any dry cleaning costs, but you’ll need to have diary entries and receipts “if both the amount of your claim is greater than $150, and your total claim for work-related expenses exceeds $300” (thanks HR Block).

Bonus: If you work outdoors you can also claim the costs of sunscreen, hats and sunglasses!

Just so we are clear though, regular office and hospitality wear such as black pants, white shirts and closed shoes that don’t offer an above average level of foot protection can’t be claimed.

More info here.
3. Home office costs
Are you a small business owner with a dedicated home office? Yes? You’re going to love this section.
First, you claim the running costs you incur when conducting some or all of your business from home, such as:

• Heating & cooling
• Electricity
• Maintenance/repair of home office furniture and fittings and;
• Cleaning

Just remember that you cannot claim these costs for your whole house, only the portion you use to conduct your work. This is usually your office. A popular way to determine what percentage of your total bills goes towards running your office is to calculate the floor space of your office as a percentage of the floor space of your entire house and apply that percentage to your bills.

Second, you can claim home office purchases such as computers, stationery, toner or even software subscriptions. 

The rules for what you can deduct are:
Items valued up to $300: You can claim the entire expense.
Items worth more than $300: You can claim their yearly decline in value.

More info here and here. 
4. Phone bills
The costs of business calls are an easy tax deduction that almost everyone can make.
Don’t have a dedicated work phone? No worries. You’re allowed to deduct the work-related portion of your regular phone bill and line rental.

If, however, you can’t be bothered going through your bills to work out what percentage of your usage is work-related, you might as well bite the bullet and buy a work phone - the phone itself will be wholly or partially deductible depending on how much it costs!

More info here
5. Insurance
The Australian government is happy when it doesn’t have to foot the bill during a disaster, which is why it rewards insurance policy-holders with some tax deductions for the premiums they have paid.
Some insurance premiums are entirely tax deductible, and some aren’t. It all depends on the type of insurance you have and whether your policy is held within your super.

This area of taxation is tricky, so if you’ve got life insurance, TPD insurance, income protection insurance or trauma insurance, you should seek professional advice before you claim any deductions.
6. Charity
Have you donated to charity this year? Good for you! You can now strike that money right off of your tax bill just as long as:
1. Your donation was more than $2
2. It was given to a “deductible gift recipient”
3. You didn’t get anything in return (otherwise it’s not a gift)
4. You gave money or property (as in physical objects, not housing!)

If you’re not sure whether your gift is tax-deductible, check your receipt. You can also find a list of deductible gift recipients on the Australian Government Business Registrar website.
7. Political donations
Yes, that’s right. Whether you threw a few bucks towards the LNP, the Sex Party or any other registered political party or candidate, you can now feel free to deduct that expense from your tax bill (as long as it is between $2 and $1500 and you donated as an individual, not a business).
8. Study expenses
The government offers a host of deductions when it comes to work-related education: Tuition fees, textbooks, journal subscriptions, parking fees, internet usage… the list goes on.
But there is one major catch. Your study has to be directly related to your work. Specifically, you must ensure that it:

1. Leads to a formal qualification and;
2. Maintains or improves skills related to your current job and;
3. Will increase or likely increase your income.

For example, if you’re already employed as a plumber and you’re undertaking a Restricted Electrical course so that you have the skills you need to deal with electrical fittings in the course of your existing job, you can claim deductions for many of the expenses you incur while undertaking that course.

If, however, you’re an art student working as a Big W checkout operator on the side, you won’t be able to claim any costs related to your university degree.
9. Tools & equipment
You can claim a deduction for tools and equipment you buy for work but the same rules apply for office equipment:
• The costs of equipment and tools (that aren’t part of a set) that you pay $300 or less for can be fully claimed.

• Only the depreciation of tools and equipment that you pay more than $300 for can be claimed.

As with office equipment, the insurance, repair and maintenance costs of your tools and equipment are also deductible.
10. Tax return preparation costs
If you hired an accountant or another tax professional to prepare your return last year, you can now claim that cost on this year’s tax return. You can’t claim the return preparation costs you incur this year until next year, however. Sorry about that.
11. Investments & interest
Did you spend money earning investment, dividend or interest incomes in the last financial year?
You can claim a range of costs related to earning these types of income back, such as:

• Account keeping fees (although you can’t claim the cost of drawing up an initial investment plan unless you run an investment business)

• Interest charged on money you borrowed to buy shares (provided these shares produced an income) or an investment property (this takes out down the 'negative gearing' rabbit hole - sorry not enough time today to cover that)

• Management fees and retainers

• The costs of attending investment seminars

• Investment journal subscription costs

• Franking credits from dividends 

So, there you have it! A layman’s guide to tax deductions.

If you want more detailed advice on any of these deduction categories, check out the ATO website. Or, if you need specific help with your situation, you can find a registered tax practitioner here.

Happy EOFY!

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