The tax season is a time some people look forward to as they have paid their taxes all year and are looking to get a nice refund to compensate for all the tax deductible expenses they have paid throughout the year.
You now need to think about any work related expenses that you have paid over the last financial year. Generally, expenses will be tax deductible if they meet the below criteria:
– Does the expense directly relate to your income generating activity (work)
– Did you pay for the expense? You can’t claim it if you were reimbursed by your employer
– Do you have a record of the deduction (e.g. a receipt)
The way many people work has changed over the last 12 months, with many working from home for extended periods of time. We will explore below some tax deductions that you may be able to claim on your return this year:
1. Home Office Expenses
Much like the rest of the working world, you’ve probably made the shift to working from home.
The ATO allows you to claim for your home office using the “Shortcut Method” for the 2021 year. To keep it simple, the ATO allows you to claim a rate of 80 cents per hour for your running expenses, rather than needing to calculate costs for specific running expenses.
Whilst this is the simple method, you can choose one of three ways to calculate your home office running expenses due to working from home during the year which we explore below.
Shortcut method (available for the full 2021 financial year)
This is the simplest method of calculating your running expenses. You can claim a rate of 80 cents per work hour for all additional business expenses incurred during your time working from home. This covers things like electricity and internet costs, tech consumables, cleaning, and decline in value of office equipment.
However, this must strictly cover full work duties — not the occasional email check or phone call.
Also, if you choose this method you’re unable to claim a further deduction for any business expenses already covered. So, for example, you can’t also claim your internet bill on top of this method.
In order to claim in this method, you must keep a record of the hours you work from home as a result of COVID-19. It can be your timesheet, or a diary note.
When entering this in your tax return enter it as ‘COVID hourly rate’.
Fixed rate method
Under this method, you can claim:
-A rate of 52 cents per work hour to cover things like electricity, heating or cooling, and the decline in value of your home office furniture.
– The work-related portion of the actual costs of your internet and phone expenses, computer and tech consumables, stationery, etc.
– The work-related portion of the decline in value of your main business device, whether it’s a laptop, home computer, or similar.
As per the Shortcut method, to claim the Fixed rate method you must keep records of the hours you’ve worked at home during this time. This can be either a timesheet, diary note, or a diary for a representative four-week period to demonstrate your typical working pattern.
Actual cost method
This is the most accurate, yet most time consuming method. Under this method, you must be able to provide evidence of any expenses incurred.
This includes:
– Recording the actual number of hours worked during this time.
– Determining the amount of electricity you use for your particular home office set up, for the hours you worked from home.
– Keeping all receipts for work-related expenses, including assets, consumables, cleaning, and any repairs required.
Where you don’t have a dedicated working area, electricity expenses can be calculated by multiplying the individual unit rate by the hours you worked from home.
If any of your expenses are covered by your employer, such as phone or internet bills, these can’t be claimed as a tax deduction.
2. Vehicle and travel expenses
There are two main methods of claiming motor vehicle deductions:
– The logbook method – click here for more information on logbooks
– The cents per km method – capped at a maximum of 5000 kms.
Motor vehicle expenses can only be claimed on eligible work related travel journeys.
A work-related journey is one of the below:
– Directly between two separate workplaces
– From your normal workplace to an alternative workplace that is not a regular workplace while still on duty, and back to your normal workplace or directly home
– If your home was a base of employment – you’re required to start your work at home then travel to a workplace to continue your work for the same employer
– If you had shifting places of employment – you regularly work at more than one site each day before returning home
– From your home to an alternative workplace that is not a regular workplace for work purposes, and then to your normal workplace or directly home.
– If you need to carry bulky tools or equipment that your employer requires you to use for work but you can’t leave at your workplace (for example, an extension ladder or a cello) – the tools or equipment are bulky, meaning that because of the size or weight they are awkward to transport and can only be transported conveniently by motor vehicle.
3. Work related clothing
There are many rumors around what you can claim in relation to your work clothing, we are here to break it down for you.
You can claim a deduction for the the cost of buying and cleaning eligible work clothes such as:
– Occupation Specific clothing (such as a robe worn by a barrister)
– Protective and unique clothing (such as fire-resistant clothing, steel-capped boots etc.)
– Work Uniform (Any clothing that has a relevant badge or other identification)
You can claim the cleaning (washing, drying and ironing) of any of these eligible work clothes. Please ensure that you keep the receipts to substantiate these claims.
You cant claim the following:
– You are not able to claim any of the above for clothing that is not specific for your occupation. This includes business suits and office wear, you can only claim these if they include a badge or logo.
– You are also not allowed to claim clothing that you are required to wear for work if it is does not meet the above requirements. For example if you work for a clothing label and are required to wear that label to work, you are not allowed the claim the cost of purchasing these.
4. Self Education Expenses
You are able to claim a deduction for Self-Education expenses if they meet the following criteria:
– Lead to a formal qualification
– Have sufficient connection with your current employment and either maintain/improve the your current skill set or knowledge in your role, or may lead to an increase in your income in your current employment.
If your expenses do not exactly meet this criteria, then you are not able to make this claim. For example, if the qualification allows you to get new employment, then this is not deductable.
Examples of what you can claim are as follows:
– Course/Conference/Tuition Fees
– Accommodation and meals if you stay overnight
– Computer expenses
– Depreciation on any capital expenditure (over $300)
– Repairs on any capital assets
– Travel expenses & Fares
– Home office costs
– Internet
– Parking (directly related)
– Phone usage
– Postage & Stationery
– Student union fees
– Any other student fees
– Textbooks
– Journals
– Travel to and from education precinct
Examples you can’t claim:
– Meals when you are not staying overnight
– Repayment of HECS/HELP loan
– Home office occupancy expenses
5. Other potential deductions
There are a number of things that can be claimed in addition to what has been explained above, some common examples are:
– Union fees
– Income Protection Insurance Premium (if paid personally, not in superannuation)
– Concessional Contributions to your superannuation
– Work related subscriptions
– Cost of managing tax affairs (accountant fees)
– Industry specific deductions
As you can see from the above information, there are a number of deductions you may be able to claim. At Nixer, we are always here to help. If you have any questions on anything tax, please feel free to reach out via our chat function, or via email to support@nixer.com.au
