The Most Overlooked Tax Deductible Expenses You Can Claim
We may be at the start of a new year, but we’re already halfway through the financial year. So, it’s a good idea to start thinking about getting yourself sorted for tax return. The Australian Government collects close to $530 million in taxes each year, some of which is taken from Australians who simply don’t know how to claim their tax deductibles. To give you a quick refresher on tax deductibles, we’re going to walk you through a list of what you can claim, when you need receipts and when you’re fine without, and what special rules apply to businesses!
Your next tax return is due in June, which is only a few months away. If you’re feeling less than well prepared, fear not - it’s never too late to get organised. Putting your head in the sand only makes things worse, not better. With a little bit of preparation and using the right tools, you can make this year's tax return as pain-free as possible.
There are a few general rules that always apply! Expenses are claimable if all of the following boxes are ticked:
- The expense was a work-related
- You have an official record of the expense (receipt or bank statement)
- The money wasn’t reimbursed by your employer
So far, so good. Now on to the nitty gritty! We asked our Senior Accountants for the most common claimable expenses, including those who are often overlooked.
Tip: We know you don’t want to leave your hard-earned money in the ATO’s pockets this year. But did you know that The Australian Taxation Office actually provides great resources for anyone who is trying to sort out their tax return, including a detailed list of expenses you can claim
A) Individual Tax
You already know that you can only claim expenses that are directly related to your earnings. You must also have spent the money yourself and kept a record of proof, such as a printed or digital purchase receipt. Please note, that in case your total claim is under or equal to $300, you will still need to show how you worked out your claim. Should the expense have been both for work and personal use, such as your phone or internet bill, you can only claim a part of the expense.
1. Work Expenses You Can Claim
- Vehicle and travel expenses
- Clothing, laundry and dry cleaning
- Self-education expenses such as seminars, conferences and education workshops
- Tools, equipment and other assets
- Books, periodicals and digital information
- Cash shortages or client bad debts
- Claiming mobile phone, internet and home phone expenses
- Glasses, contact lenses and protective glasses
- Working with children checks
- Income protection insurance
Tax returns can be tricky. An experienced tax accountant
can help you do your tax return each year, and even lodge the return for you!
2. Industry-Related Tax Deductibles
Depending on your industry and occupation, your tax deductibles will vary. While employees in the fitness industry can claim even sports bras and yoga mats, their friends working in retail may only be able to deduct protective clothing and the cost of purchasing, laundering and repairing work uniforms or shirts, with the company logo on it.
3. Claiming Without a Receipt?
Paying money for work-related items and keeping no receipt is an expensive mistake. The ATO states that work-related items up to a maximum value of $300 can be claimed without receipts, but anything over this figure and you will have to prove your expenses. To avoid any trouble later on, it’s therefore highly recommended to have a system in place that helps you organise your receipts and invoices - even if that simply means throwing them in a shoebox.
Business tax, which includes small businesses, freelancers and anyone who is making a living through self-employment, has its own rules. You can claim any expenses that you help carry out your business as they relate to your assessable income. These expenses must not be for private use and again, you must keep records to prove those expenses. This is where hiring a bookkeeper
can come in handy!
1. Business Expenses You Can Claim
- Motor vehicle expenses
- Home-based business
- Business travel expenses
- Workers' salaries, wages and super contributions
- Repairs, maintenance and replacement expenses
- Other operating expenses
- Depreciating assets and other capital expenses
- Carbon sink forest expenses
Keeping Track Of Your Receipts
"The dog ate my receipt” might be a great story to tell between you and your close friends, but chances are, the ATO is not going to be very amused. A few simple record-keeping tricks can help you to avoid trouble and put extra money into your tax refund.
To be fully prepared for the end of the financial year, what documentation do you actually need?
You’ll need a record of ALL the income you have received during the past year, which includes: salary, rent from rental properties, income from letting a room, investments, dividends, managed funds and allowances. Next, you’ll need a record of all your tax-deductible expenses as listed above.
Get organised and keep all your paper records in a folder, possibly organised by colour. You may want to create a list of all your expenses of each type, using Google Sheets or Airtable
, to allow you to access your data from anywhere, anytime and keep everything stored safely in the cloud. Knowing the total amount of each type of expense will make tax time a breeze.
The ATO suggests that you keep your records for five years if you claimed a deduction for decline in value, acquire or dispose of an asset or are in dispute with the ATO. For most other taxpayers who have simple tax affairs, you should keep records for at least two years.
Shoebox can help you to manage your finances - We even wrote a blog post
about how to control your finances before they begin to control you!
Throughout the financial year, we all end up collecting a tonne of payment summaries and receipts, invoices and contracts, that are important for doing your tax. It can be hard to keep track of everything and stay organised. Luckily, there are some great tools out there that can help you to stay on track. You haven’t heard of MyDeductions yet? The ATO record-keeping app for individual taxpayers, small business owners or self-managed super fund trustees, will make your life easy.
How to Use the ATO App myDeductions
- Download the ATO app to your phone or tablet.
- Sign up and personalise your myDeductions tool.
- Add your expenses.
- Add your trips.
- Add your business income.
- Take a picture or upload a screenshot of your receipts.
- Back up, email and restore records and delete your back up.
- Upload to tax return through the app.
3. Getting Help From a Bookkeeper
Not sure if you should hire a bookkeeper
? Running a small business is a full-time job that extends beyond the normal nine to five. We understand you’re very busy, so hiring a helping hand to organise paperwork, financial data and maintain accurate books on accounts payable and receivable, as well as payroll can be a tremendous relief. Hiring a specialist to perform daily accounting tasks gives you more time to focus on selling, creating, or growing. In addition to your business tax return, some businesses also have to lodge a BAS - a bookkeeper can help you make this much, much easier.
In a Nutshell
By now you’re well equipped to get a maximum refund on this year’s tax return. To make sure you get it right, let’s quickly wrap up the most important facts!
Here is a brief checklist of things to keep in mind when preparing for your tax return:
- Make use of free services and apps like MyDeductions to stay organised throughout the year or hire a bookkeeper
- Inform yourself about tax deductions specific to your industry - an experienced accountant can help you to find out specifics
- Have payment and income summaries ready, this includes payments from Centrelink, sharing economies such as Airbnb and cash payments
- Have annual tax statements from trusts, managed investments, property and cash management trusts ready
- Keep a list of all work-related expenses (with receipts), including accounting fees charged for previous year’s tax return and any extra superannuation contributions
- Have a system in place to organise your receipts that makes sense to you, whether it’s a shoebox or software specifically designed to the purpose
Hiring a Shoebox accountant can bring great relief to anyone wanting to make sure to take every possible tax deduction available for them and their business into account. Check-in with our accountants and bookkeepers today: You can keep all your receipts and invoices in your shoebox and we’ll do the rest for you! Send us an email to request a free consultation