There are different rules for claiming tax deductions for individual salary and wage earners to those carrying on a business. You are entitled to claim a deduction for certain expenses which are directly related to earning your income. In some instances, this can be a very complexed issue and it is always best to consult a Registered Tax Agent as penalties for getting it wrong can be quite severe.
As a basic rule to claim a work-related deduction:
- you must have spent the money yourself and weren’t reimbursed
- it must be directly related to earning your income
- you must have a record to prove it.
The biggest issue I have come across with clients is the issue that it must be directly related to earning your income. What we as taxpayers see as directly related is not always the ATO’s view.
If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion. In these circumstances, it is even more important that you maintain detailed records. Work expenses reimbursed to you by your employer are not deductible in your personal income tax return. The ATO can seek information from your employer if it suspects you have claimed as a deduction an expense for which you have already been reimbursed.
Reimbursements should not be confused with Allowances. Generally, with a reimbursement you will produce receipts to your employer who will refund the amount, generally in cash and therefore there is no requirement for you to declare this in your tax return. Allowances are generally paid through your regular income, they are reported on your Group Certificate and are declared as part of your income. A deduction may be claimable against this allowance provided you have met the requirements.
Casual employees cannot claim work-related expenses until the financial year they receive income. This means that if you start casual employment in June but don’t receive income until the next financial year, you cannot claim deductions for work-related expenses incurred in June.
If you employ someone to assist you in your salaried employment, you cannot claim a deduction for employing that person.
The ATO website provides more detail in relation to specific deductions. Click here for more detail on deductions.
