A guide to what you can and can't claim at tax time
Rules about what you can and can’t deduct on tax can get confusing fast. The good news? There are often still plenty of legit work-related expenses you can claim to boost your tax return – without getting on the ATO’s bad side.
We spoke to H&R Block, Director of Tax Communications, Mark Chapman, to find out what you should know about claiming work-related deductions come tax-time.
What you can claim
In general, to qualify as deductions expenses should be:
- Directly related to your work
- Not reimbursed by your employer
- Officially recorded via a receipt or bank statement
Common deductions include:
- Work from home: If you work from home, you can claim part of your home running costs using either the ATO fixed rate of 70 cents per hour (with records of your working hours) or actual expenses based on work-related costs. Claimable expenses include:
- Depreciation of assets like home office furniture and electronic devices
- Electricity and gas used for heating, cooling, lighting, phone and internet costs
- Stationery and computer consumables
- Cleaning costs for your dedicated home office.
- Education: Courses, seminar and workshop costs are claimable if they relate to your current job and help you maintain necessary skills. However, you can’t claim any courses that help you get a new job or promotion.
- Motor vehicle claims: Work-related journeys such as visiting clients or suppliers are claimable. For personal vehicles, you can either claim 88 cents per kilometre (maximum 5,000km) or maintain a logbook for your actual travel expenses. Parking and tolls are also deductible, plus public transport costs when not using your car.
- Travel expenses: If you travel for work and need to stay overnight, you can claim for meals, accommodation and incidentals — as long as your employer hasn’t already reimbursed you. The ATO publishes reasonable expense amounts annually. This means, if you get a travel allowance and stay under the ATO’s reasonable limits, you won’t need receipts from your travels. But if you go over, or don’t get a travel allowance, you’ll need to keep detailed records of each purchase.
- Work-related clothing: Uniforms with business logos and protective items like helmets, safety equipment, sunglasses and sunscreen are deductible, along with the laundry costs of maintaining them.
- Union fees and professional memberships: Fees for your union or any relevant professional licence renewals, registrations, memberships or subscriptions can be claimed, as long as they’re directly related to your current role.
What you can’t claim
Sometimes, people try to claim all sorts of things that might seem related to work, but aren’t a legitimate work expense. Chapman says this can be anything from personal grooming (such as hair and makeup expenses), childcare costs and even medical expenses such as sleep apnoea machines.
Two of the most common ones that you may consider are:
- Commuting costs: You can’t claim the cost of getting to and from work. Even if it’s a long trip, or you only go into the office occasionally, commuting is considered a private expense as the work day only begins when you actually get to work, and ends when you leave. The only exception to this is travel expenses if you need to carry bulky tools or equipment and there’s no safe place to store them at work.
- Everyday clothing: Regular clothing worn at work, such as a plain t-shirt or shorts, can’t be claimed as business-related expenses, even if you only ever wear these particular items when you’re working. This includes business suits and clothing worn by retail staff in clothing outlets.
Keep records throughout the year will help make tax time easier. This includes invoices or receipts, logbooks for work-related car use and diaries/timesheets/copies of rosters for any working from home expenses.
Apps like the ATO’s MyDeductions or H&R Block’s ReceiptHub help you easily capture and log expenses.
Common mistakes to avoid
1. Not claiming what you’re entitled to
If it’s a genuine work-related expense and you have the evidence, don’t hesitate to claim it! A good accountant or tax agent can provide advice if you’re unsure. These costs can add up fast and make a difference to your tax total.
2. Embellishing deductions
While you shouldn’t shy away from claiming what you’re entitled to, be cautious about exaggerating these in order to get a bigger refund. The ATO watches for unusual claims, and self-lodgers using the ATO’s myTax program are monitored as they prepare their tax return to check no one is over-claiming. The ATO’s systems compare your claims against others in similar roles and will give you a warning to rethink a deduction if it raises alarm bells. If your claims are found to be incorrect, you’ll need to repay the tax, plus interest, and the ATO might even charge a penalty.
3. Relying on pre-filled data from the ATO
These days, much of your information is pre-filled straight from the ATO’s system. However, don’t assume that income data is always correct or complete, says Chapman, particularly if you’re lodging early. Many employers don’t submit data until late July or August. If you leave out income and get questioned by the ATO, the legal burden will be on you, even if the information came from the ATO’s pre-filled data. So be sure to check!
With a bit of preparation and good record keeping, tax-time can be made a whole lot easier. Visit the ATO website for more information on work-related deductions. If you’re unsure about what you can or can’t deduct, reach out to an accountant or tax agent for help – check out MoneySmart for advice on choosing one.
