Tax Myths: Work Related Expense Deductions
There may be all sorts of tax deduction myths surrounding what you can and can’t claim as a work-related expense. But, would you believe a myth about claiming deductions on your wedding reception? Some Australian’s did, and were promptly rejected by the ATO, along with those that tried to claim gambling losses, Lego sets, and dental expenses. These are only the most ridiculous claims that the ATO found this year.
It seems that the myths sourced through pub-talk, BBQ-banter, and what your taxi driver just overheard, are spreading quickly. How these myths started is anyone’s guess, but these myths are dangerous. They lead to some unaware taxpayers making incorrect claims, getting the attention of the ATO.
Here are 9 common myths.
Anyone can claim automatically $150 for clothing and laundry, 5000km under the cents per kilometre method for their car, or $300 for work related expenses, even if they did not spend any of that money.
An automatic or standard deduction does not exist. While you won’t need receipts for claims under $300 for work related expenses, or $150 for laundry expenses, or if you are claiming 5,000 km or less for car expenses under the cents per kilometres method, you still need to have incurred the expense. While substantiation exceptions do relieve you of the need to keep invoices in specific circumstances, you will still need to be able to explain how you calculated your claim. All deduction claims must also be related to earning your income, and clothing deductions are for laundry costs only, not the cost of buying (non occupational specific) clothing.
I can just use my bank or credit card statement instead of a receipt.
A receipt shows that you spent the money, what you spent it on, who the supplier was, and when you paid. A bank or credit card statement does not. Unfortunately, that is the information you need to claim a deduction and be able to prove that you are eligible to claim the deduction. The only time you will not need this information is if substantiation exceptions are applied.
If I work outside, I can claim makeup that has sunscreen in it.
If the sole purpose of purchasing the product is for sun protection, say it has a high SPF rating, and it just incidentally has a cosmetic component, then sure it may be deductable, if you work in the sun. However, cosmetics themselves are a private expense and the addition of sun protection does not make the purchase deductible.
I need to be fit for work so I can claim my gym membership.
Sure, if your job depends on you maintaining a very high level of fitness and you are tested regularly for that. You may have to be special operations personnel in the Australian Defence Force, or an athlete (where this is your income source, and the gym is where you train) to be able to claim this deduction though. It is very rare for anyone to be able to actually claim a deduction on their gym membership.
I can claim all of my travel expenses if I have a conference or a few days’ work in the middle of it.
Everyone loves a cheap holiday, but this is not the way to get it. If you are working or attending a work-related conference during your holiday, or adding a holiday to a work trip, you will need to apportion your expenses between work and private related components. Only the work-related component is deductible.
My boss told me to wear a certain colour, that means I can claim my work clothes.
Unfortunately, you cannot claim a deduction on clothing unless it is a uniform that is distinct to your employer. This means that even though your boss told you to wear black pants it is not tax deductible. As an example: If you are a Subway worker who needs a Subway shirt with a logo on it and plain black pants, you can claim a deduction on the shirt, but not the pants.
I can claim my pay television subscription as I use it to keep up-to-date for work.
Subscriptions to pay television is usually a private expense, and so, not ordinarily deductible. Needing the subscription to keep up to date the news and current affairs will not have a sufficiently close connection to your employment activities. So, you likely will not have a basis to claim a deduction on these subscriptions.
I can claim travel between home and work as I need to get to work to earn an income
Travel from home to work is considered a private expense. You can claim a deduction on travel from work to another place of work, say if you were traveling to see a client.
I can claim my phone and internet plan for business and private phone calls and internet use as I have a capped plan.
You can claim all of a phone or internet plan if you use it only for work. If you use it privately as well, then you will need to portion the costs between work related and private usage. From there you can only claim the work-related portion.
Believing tax deduction myths without proper research can be dangerous. You should always talk to your accountant before claiming any deductions on your tax return. An accountant will be able to assist you in getting the most back from your tax return. Talk to Link Advisors today about safely maximising your tax deductions.