Most common tax deductions people forget about

Let’s be honest. Figuring out what you’re entitled to claim on your tax return can be confusing.

And while everyone’s situation is different, getting to know a few commonly missed tax deductions – and figuring out whether any apply to you – could mean a little more cash back at tax return time.

Work from home expenses

Are you one of the 2.5 million Aussies who works from home?¹ Here are some expenses you may be entitled to claim.

Occupancy expenses

If you have a dedicated business space in your home, you may be allowed a tax deduction on your:

• rent
• mortgage interest
• council and water rates
• land tax
• cleaning expenses, and
• home insurance premiums.

However, you must be able to establish to the ATO that your employer doesn’t provide you with an alternative place to work from. You may also have to demonstrate that the area of your home used for work is almost exclusively dedicated to business. The ATO provides an interest deductibility test to determine if you satisfy the definition of running a business from home.

If you’re currently running a business from home or planning to start, AAMI’s Business At Home Insurance could provide you public liability cover and cover for your business assets.

Explore AAMI Business at Home Insurance

Running costs

Working from home means you could claim some additional running expenses. These can include:

• electricity or gas for lighting and air conditioning
• home internet and mobile phone data plans
• phones used in connection with your work
• stationery and office supplies
• for assets valued less than $300 – like office furniture and computer equipment – an immediate deduction is available, and
• for assets valued over $300, decline in value based on the asset’s effective life.

Deductions for some items, such as mobile phones, electricity, gas and internet, need to be determined based on business use relative to private use. If only half of your phone use is for work, you can only claim 50% of the related costs.

How to calculate your work from home expenses

As of 1 July 2022, the ATO offers two methods for calculating your claim.

• The revised fixed rate method. This means you can claim 67 cents for each hour you work from home, plus a separate amount for expenses not covered by the revised fixed rate.

The expenses included in the revised fixed rate are:

• data and internet
• mobile and home phone usage
• electricity and gas
• computer consumables (e.g. printer ink), and
• stationery.

The revised fixed rate does not include the following expenses for which a separate deduction is available:

• the decline in value of home office equipment
  
• repairs and maintenance of that equipment, and
• cleaning costs (in the case of a dedicated home office).

Using this method means you don’t have to work out a specific dollar amount – simply multiply the hours worked at home by 67 cents.

• The actual cost method. This involves claiming for the actual expenses you incurred as a result of working from home.

For both methods, you’ll need to keep records to show the work from home expenses you have incurred and also track the hours you have worked from home during an income year.

The method that best suits you may depend on your circumstances. For advice on determining the most appropriate method, consider speaking to your accountant or tax agent.

Landlord insurance and rental property costs

If you own a rental property, you may be able to claim some expenses you incurred from the time it was rented, or available for rent. These include, but are not limited to:

• landlord insurance premiums
• marketing costs
• property managers fees
• cleaning and maintenance costs due to tenant wear and tear, and
• depreciating assets – such as dishwashers, curtains and carpets. 

If you want to cover your investment property, both inside and out, AAMI Landlord Insurance can help. We also offer cover for unpaid rent by tenants under our Tenant Protection Optional Cover.

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Other work expenses

Here are some lesser-known work expenses you may be entitled to claim for. The ATO website also has handy occupation and industry specific guides available.

Personal super contributions

After-tax personal contributions are a great way to boost your super and are also tax-deductible up to your concessional contributions cap. This is the limit on how much you can pay into your super without having to pay extra tax.

Before you can claim you’ll need to let your super fund know of your intent to claim and receive their acknowledgement. Check the ATO website for the full eligibility criteria.

Income protection insurance

If you have an income protection cover – such as AAMI Income Protection Insurance – you may be able to claim a deduction for the cost of insurance premium you pay against the loss of your employment income.

However, if your policy provides benefits of an income and capital nature, only that part of the premium that relates to the income benefit is deductible.

You can’t claim a tax deduction if the policy:

• compensates you for things such as physical injury, or
• is taken out through a superannuation fund and insurance premiums are deducted from those super contributions.

For instance, you can’t claim a deduction for:

• life insurance premiums
• critical care insurance premiums, or
• trauma insurance premiums.

Consult the ATO website or your tax adviser for more information.

Car insurance and insurance for other vehicles

If you use your car or other motor vehicle for business purposes, then you may be able to claim all or part of your insurance premium – such as on your AAMI Commercial Motor Insurance policy. This doesn’t relate to vehicles used simply to get to and from work – the vehicle use has to be directly related to earning your income.

There are two methods you can use to claim a deduction on your tax return:

• The logbook method. By logging the time spent driving for work versus personal use, you can claim the work-related percentage of your insurance premium as a deduction.
• The cents per kilometre method. This incorporates all costs, so there is no separate deduction for the vehicle insurance if you use this method.

If the car you use is arranged through salary sacrifice or novated lease, then you won’t be able to claim car expenses, as the vehicle is being leased by your employer from a financing company. However, you may still be able to claim additional work-related expenses such as parking and tolls.

Explore AAMI Commercial Motor Insurance

Transport and travel for work expenses

If you need to travel to perform your work duties, you may be able to claim things like the following:

• Costs incurred for trips between workplaces. These may include fuel costs for driving your car, or ride-share and flight bookings.
• The cost of staying in a hotel.
• Meal expenses.

However, you cannot obtain a deduction for the above expenses to the extent you are reimbursed by your employer.

If the expenses relate to a car you own, leased or hired under a hire-purchase agreement, the deduction will need to be claimed under work-related car expenses through the logbook or cents per kilometre method. All other expenses will need to be claimed under work-related travel expenses on your tax return.

Tradie tax deductions

Whether you’re an employee or run a small business, as a tradie you may be able to claim deductions for expenses such as:

• protective clothing or items
• buying tools for your work or assets for your business
• car expenses like fuel and insurance, and
• self-education expenses, such as upskilling related to your existing business.

However, you can only claim if:

• you spent the money yourself and were not reimbursed (if you’re an employee)
• it was directly related to earning your income, and
• you have a record to prove it.

Clothing and laundry costs

Depending on your job, you may be able to claim costs related to buying and cleaning occupation-specific clothing or uniforms – as long as your employer doesn’t buy your work clothing or reimburse you for it.

You also can’t claim for conventional clothing. That is, everyday clothes worn regardless of occupation. So general office attire doesn’t count.

Charitable donations

You can only claim deductions for donations to organisations that have the status of deductible gift recipients (DGRs). Deductions must also meet the additional criteria:

• It is a genuine, monetary or property donation – such as the voluntary transfer of money or shares without receiving any material benefit or advantage in return.
• It complies with relevant gift conditions – things like extra income tax law conditions affecting some DGRs.
• You have a receipt from the third party.

Other tax return tips

The Australian tax system regularly relies on taxpayers self-assessing. This means you are responsible for working out how much you can declare and claim on your tax return.

So, it’s a good idea to do the following:

• Keep receipts and note down expenses as you incur them, to not miss out on being able to claim at tax time.
• Make sure to do your research ahead of July – you don’t want to claim for the wrong thing or miss out on tax deductions you may be entitled to.
• If you run a small business, make sure to keep enough information in your records to be able to accurately calculate and substantiate your income and expenses. A professional accountant should be able to assist with keeping and collating such records.

Read more:

• Home Business Insurance costs
  
• What is Public Liability?
  
• Tools of the trade: Insurance for tradies

^1. Australian Bureau of Statistics

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