Work-Related Tax Deductions: What You Need to Know

The most important thing to remember for work-related expenses is that you must keep records.

It is easy to make big plans for the tax return you believe is coming your way. Home improvements, holidays, or paying down debt usually top the list of ways to spend the windfall. However, to get a refund, you need the numbers to align. This is where our expert tax accountants can help.

A big part of your refund comes from your ability to deduct enough from your taxable income. Unfortunately, many taxpayers misunderstand their work-related deductions, and mistakes happen. This guide can help you determine what you can or cannot deduct as well as highlight some deductions you may be missing to help maximise your tax refund.

How Do I Know What I Can Deduct?

When determining what you can deduct, ask yourself these three questions.

  1. Did the expense relate directly to your job or an income-generating activity?
  2. Did you pay for necessities without being reimbursed by your employer?
  3. Do you have receipts or bank statements that show the expense?

Usually, if you can answer yes, the expense in question is likely deductible. However, exceptions do occur.

Work from Home Deductions

Although many employees worked from home before the pandemic, many more transitioned to permanently working from home after 2020. Others work hybrid schedules going into the office a few days and doing the balance of their work from home. Both situations create confusion when working out what is deductible.

  • Home office expenses – There are a number of these that you can claim, provided you have the proper documentation.
  • Phone expenses
  • Internet charges
  • The portion of your home that is dedicated office space- If you do not have a specific area such as a spare room or a nook for your office, then you can only deduct the number you used in a shared space (like the dining room) to conduct your business.
  • Home office equipment like computers, phones, cameras, office furniture, or printers
  • Computer consumables such as ink and printer paper
  • A portion of your insurance
  • General office expenses- The standard rate you can deduct as a part of running your home office (in a dedicated office space) is 52 cents per hour. If you prefer to claim actual rates, you must have an established and documented pattern of use
  • Fees for work-specific software
  • Repairs for specifics such as a broken office window
  • Your phone bill
  • Digital information
  • Subscriptions directly related to your work
  • Business insurance policies

There are several work-from-home costs that taxpayers attempt to deduct. However, these expenses are not viable work-from-home deductible costs.

  • Your monthly rent or mortgage repayment
  • The total amount of utility bills
  • Coffee, tea, cream, sugar, and snacks
  • Décor upgrades (new window treatments, rugs, art)

General Work Deductions

Taxpayers who work outside their homes have several applicable work-related tax deductions. As with the other types of work-related tax deductions, be sure to keep well-organised records of the expenses.

  • Vehicle expenses – Even though this expense can be time-consuming to document, being able to deduct the cost of using your car for work can boost your tax refund. Remember, you cannot claim the commute to and from your job as this is a private expense in the eyes of the ATO.
  • Work-related travel – This must be travel you pay for without being reimbursed. Keep a record of the travel details, including accommodations and meals.
  • Required technology upgrades on your equipment not reimbursed by your employer
  • Union Fees – If you pay fees for mandatory union membership, you can deduct the expense.
  • Investment income
  • Protective equipment you pay for out of your pocket – Things like protective footwear, non-slip shoes, or overalls all are deductible if you cover the cost without being reimbursed.
  • Income protection insurance – If you pay for an income protection insurance policy, you can deduct the premium.
  • Laundry – If you wear a uniform with your employer’s logo, you can claim $150 a year for laundry expenses without receipts. You may be able to deduct the cost of occupation-specific clothing if you have receipts.
  • Donations and gifts – If you give gifts or donations to organisations with the status of deductible gift recipients (DGRs), you can deduct the gift if you have proper documentation.
  • Last year’s tax preparation fees

Education Related Deductions

If your education relates to your job and is likely to produce a promotion or income increase, you can claim the expenses as a deduction. Remember, the course must show a significant connection to your job to count as a deduction.

Other education-related deductions include:

  • Memberships in professional groups
  • Course fees and applicable parking costs
  • The cost of technical equipment that totals less than $300
  • Textbooks
  • Academic journals and trade publications
  • Student fees
  • Internet
  • Computer consumables
  • Equipment repair
  • Stationary costs
  • Home office costs
  • Travel-related expenses
  • Accommodations and meals if you are away from home overnight
  • The decline in value of assets $300 or less

Regardless of the type of deduction, you need to be able to prove all of your deductions. Keep a logbook or an online spreadsheet to document every expense, no matter how insignificant it may seem.

Remember, The Australian Tax Office announced its intent to crack down on tax deduction inaccuracies. The ATO has highly advanced technology to find the most minute mistakes on tax returns. Working with a team of professionals such as M2 Corporate can help prevent costly errors on personal and business taxes.

Lodging your taxes does not have to be stressful. Start early, stay organised, and ask for help if you need it. Contact the trusted advisors at M2 Corporate. They are available to walk you through the filing process or answer your questions. You can count on expert guidance from our experienced team.

**Please Note**
The material provided is for informational use only. It is not binding tax advice and should not be used to replace an individual consultation with a tax professional.

Mace Turco

Mace Turco

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Mace has always had a passion for business, and he loves working with clients who are driven and have ambitious business goals. His qualifications include an AIPA from the Institute of Public Accountants and a Bachelor of Commerce from The University of Western Australia for Corporate Finance and Financial Accounting. In 2020 Mace was awarded the 30under30 Award in the Business Advisory Category, a National Award hosted by Accountants Daily.