Tax deductions for individual tax payers

Vehicle and travel expenses

You can claim vehicle and other travel expenses directly connected with your work, but generally you can’t claim for normal trips between home and work – this is considered private travel. You need to keep records of your travel expenses.

Travel between home and work and between workplaces

While trips between home and work are generally considered private travel, you can claim deductions in some circumstances, as well as for some travel between two workplaces. If your travel was partly private and partly for work, you can only claim for the part related to your work.

What you can claim

You can claim the cost of travelling:

  • directly between two separate workplaces – for example, when you have a second job
  • from your normal workplace to an alternative workplace (for example, a client’s premises) while still on duty, and back to your normal workplace or directly home
  • if your home was a base of employment – that is, you started your work at home and travelled to a workplace to continue your work for the same employer
  • if you had shifting places of employment – that is, you regularly worked at more than one site each day before returning home
  • from your home to an alternative workplace for work purposes, and then to your normal workplace or directly home
  • if you needed to carry bulky tools or equipment that you used for work and couldn’t leave at your workplace – for example, an extension ladder or a cello.

What you can’t claim

You can’t claim the cost of driving your car between work and home just because:

  • you do minor work-related tasks – for example, picking up the mail on the way to work or home
  • you have to drive between your home and your workplace more than once a day
  • you are on call – for example, you are on stand-by duty and your employer contacts you at home to come into work
  • there is no public transport near where you work
  • you work outside normal business hours – for example, shift work or overtime
  • your home was a place where you ran your own business and you travelled directly to a place of work where you worked for somebody else
  • you do some work at home

Itinerant work

You cannot count your home as a workplace unless you carry out itinerant work. If you do itinerant work (or have shifting places of work) you can claim the cost for driving between workplaces and your home. The following factors may indicate that you do itinerant work:

  • Travel is a fundamental part of your work, as the very nature of your work, not just because it is convenient to you or your employer.
  • You have a ‘web’ of work places you travel to, throughout the day.
  • You continually travel from one work site to another.
  • Your home is a base of operations – if you start work at home and cannot complete it until you attend at your work site.
  • You are often uncertain of the location of your work site.
  • Your employer provides an allowance in recognition of your need to travel continually between different work sites and you use this allowance to pay for your travel.

Car expenses

If you are claiming a deduction for using your own car (including a car you lease or hire), it is treated as a car expense. If you use someone else’s car for work purposes, you may be able to claim the direct costs (such as fuel) as a travel expense. If the travel was partly private, you can claim only the work-related part.

Calculating your deduction

From 1 July 2015 there are two different methods for claiming work-related car expenses when using your own car, or one you leased or hired under a hire-purchase agreement

The two methods are:

Cents per kilometre method

  • Your claim is based on a set rate of 66 cents per kilomtre for each business kilometre.
  • You can claim a maximum of 5,000 business kilometres.
  • You don’t need written evidence but you need to be able to show how you worked out your business kilometres (for example, by producing diary records of work-related trips).

Where you and another joint owner use the car for separate income-producing purposes, you can both claim up to a maximum of 5,000 kilometres.

Logbook method

  • Your claim is based on the business-use percentage of the expenses for the car.
  • Expenses include running costs and decline in value but not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it and any improvement costs.
  • To work out your business-use percentage, you need a logbook and the odometer readings for the logbook period.
  • You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.
  • You need written evidence for all other expenses for the car.

Owned or leased cars

You can claim a deduction for using a car that you owned, leased or hired under a hire-purchase agreement using one of the two deduction methods. You may not be considered to own or lease the car if your do not make financial contributions such as the initial purchase, lease, hire-purchase agreements, and loan or lease payments – even though you pay for expenses such as registration, insurance, maintenance or other running costs. This does not stop you from claiming a deduction for the expenses you pay, but you cannot use any of the four deduction methods.

If you have a family or private arrangement where you are effectively the owner of the car, even if you are not the registered owner, the ATO will treat the car as if you owned it and you can claim expenses. For example, the ATO would allow you to claim for a family car that was given to you as a birthday present, even if it was not registered in your name, if you used it as your own and you paid all the expenses

Travel Expenses

Other travel expenses you may be able to claim include:

  • travel expenses you incurred for meals, accommodation and incidentals while away overnight for work, such as going to an interstate work conference (generally, you can’t claim for meals if your travel did not involve an overnight stay)
  • the costs you actually incur (such as fuel costs) when using a borrowed car or a vehicle other than a car for work purposes
  • air, bus, train, tram and taxi fares
  • car-hire fees

You may have to show that you have reduced your claim to exclude any private portion of your trip.

If your travel expenses are reimbursed you cannot claim a deduction.

Keeping travel expense records

There are specific record-keeping requirements for travel expenses, depending on whether your travel allowance is shown on your payment summary, whether your travel was domestic or overseas, the length of your travel and your occupation.

Travel Allowance

If you receive a travel allowance

If you are paid a travel allowance:

  • you must declare the allowance on your tax return as income
  • you are entitled to claim a deduction for the actual expenses you incur, less any private component.

If your travel allowance is shown on your payment summary and you want to make a claim against it, you must have written evidence for the whole of your claim, not just the excess over the reasonable amount. The records you need to keep for travel expenses for fares, accommodation, food, drink and incidentals depend on the length of your trip and if it is domestic or international.

If you travel for six or more nights in a row, you may need to keep a travel diary (see tables below) in which you record the dates, places, times and duration of your activities and travel. The purpose of a travel diary is to allow accurate calculation of the employment-related and private elements of your trip. If the travel was partly private, you can claim only the work-related part.

If you did not receive a travel allowance

Domestic Travel Overseas Travel
Written Evidence Travel Diary Written Evidence Travel Diary
Travel less than 6 nights in a row Yes No Yes No
Travel 6 or more nights in a row Yes Yes Yes Yes

If you did receive a travel allowance

If you received a travel allowance and your claim does not exceed the reasonable allowance amount:

Domestic Travel Overseas Travel
Written Evidence Travel Diary Written Evidence Travel Diary
Travel less than 6 nights in a row No No Written evidence is required for overseas accommodation expenses but not for food, drink and incidentals No
Travel 6 or more nights in a row No No Written evidence is required for overseas accommodation expenses – but not for food, drink and incidentals Members of an international air crew – No if you limit your claim to the amount of allowance you receivedOther people – Yes

If you received a travel allowance and your claim exceeds the reasonable allowance amount:

Domestic Travel Overseas Travel
Written Evidence Travel Diary Written Evidence Travel Diary
Travel less than 6 nights in a row Yes No Yes No
Travel 6 or more nights in a row Yes Yes Yes Members of an international air crew – No if you limit your claim to the amount of allowance you receivedOther people – Yes

Travel diary

A ‘travel diary’ is a diary or similar document that must be obtained from the employee where:

  • the employee’s expense is incurred for travel within Australia for more than five consecutive nights and the travel is not exclusively for performing employment-related duties (the fact that the business travel requires the employee to stay away over a weekend will not, in itself, mean the trip is not undertaken exclusively in the course of their employment), or
  • the employee’s expense is incurred for travel outside Australia for more than five consecutive nights.

In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time

Clothing

The ONLY clothing that you can claim as a deduction for the cost of purchasing, renting, repairing and cleaning are:

  • Protective clothing & Footwear

fire resistant pants, steel capped boots, Hi visibility clothing, gloves, overalls, sun protection clothing.

  • Occupation specific

chefs checked pants, nurse uniform.

  • Distinctive/Compulsory Uniforms

Clothing that has a company logo.

There must be a strictly enforced policy making it compulsory to wear that clothing at work. Items may include shoes, stockings, socks and jumpers where they are an essential part of a distinctive compulsory uniform and the colour, style and type are specified in your employer’s policy.

You cannot claim the cost of purchasing or cleaning plain uniforms or clothes, such as black trousers, white shirts, suits and stockings, even if your employer requires you to wear them.

Laundry & Dry Cleaning

Cleaning of the above mentioned clothing can also be claimed as a deduction.

LAUNDRY TOTALS REQUIREMENTS
< $150 + other work related expenses < $300 No receipts
< $150 + other work related expenses > $300 Work expense receipts only
> $150 + other work related expenses < $300 No receipts
> $150 + other work related expenses > $300 All written evidence

PLEASE NOTE if you are claiming the minimum amount you must still be able to substantiate this claim with diary notes or showing how you came to this figure.

Gifts & Donations

You can claim a deduction for:

  • voluntary gifts/donation of $2 or more made to an approved organization also known as Deductible Gift Recipient
  • a net contribution of more than $150 to an approved organization for a fund-raising event
  • contributions of $2 or more to
  • a registered political party
  • an independent candidate in an election for parliament
  • an individual who was an independent member of parliament or in limited circumstances was an independent member.

You should keep records of all deductible gifts to help prepare your tax return and as evidence if your claim is checked.

Costs of Managing Tax Affairs

The cost of managing your tax affairs that can be claimed can include:

  • the preparation and lodgement of your tax return and activity statements
  • travel to obtain tax advice from a recognized tax adviser
  • appeals made to the Administrative Appeals Tribunal or courts in relation to your tax affairs
  • interest charged by the ATO
  • Amounts that the ATO imposed for underestimating a varied GST or PAYG instalment.

Home Office Expenses

Tax deductions for Home Office expenses can be claimed if your home is a place of business, or if it is used for income earning activities.

If your home is not a place of business, then your claims are restricted to running expenses only. This may include a portion of your heating, lighting, and telephone, and depreciation of equipment.

Less commonly, if your home is used as a place of business, then occupancy expenses such as rent, interest, rates and insurance may be claimable as well, but this may affect your capital gains residence exemption. It is highly unusual for an employee to have a place of business at their home.

The following factors, none of which is necessarily conclusive on its own, may indicate whether or not an area set aside has the character of a ‘place of business’:

  • the area is clearly identifiable as a place of business
  • the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally
  • the area is used exclusively, or almost exclusively, for carrying on a business, or
  • the area is used regularly for client or customer visits.
Expense Types Homeis Principal Placeof Business Dedicated HomeOffice space No specificHome Officespace
Running Costs·         Electricity·         Gas YES YES YES
Telephone Costs·         Landline/mobile·         Internet access YES YES YES
Occupancy Costs·         Rent·         Mortgage·         Rates & Land Tax·         Insurance YES NO NO
Depreciation·         Office equipment·         Office Furniture·         Office Fittings YES YES YES(except for fittings)
Maintenance Costs·         Cleaning·         Repairs & other maintenance YES YES NO

Running Expenses

Running expenses are the increased costs of using facilities within your home because of your business activities. You can claim running expenses in two ways:

  • 45 cents per hour. This rate is based on average energy costs and the value of common furniture items used in home work areas.
  • the amount of actual expense incurred based on the floor area of the office. Using your floor area may also be an appropriate way of working out some running expenses. For example, if the floor area of your home office is 10% of the total area of your home, you can claim 10% of heating costs.

You can’t claim a deduction for running expenses if there is no additional cost incurred. For example if you conduct your work in the living room of your home where other people watch the television.

Occupancy Expenses

These are expenses which relate to owning or using your home as a place of business. This means that if you run your own business from home you can often claim a percentage of total home expense based on the floor area of the office. These expenses can include:

  • Rent
  • Mortgage
  • Water rates
  • Repairs
  • House insurance

Diary records noting the time that the home office was used for work is acceptable evidence and should be kept.

Depreciation Expenses

You may be able to claim a deduction for the decline in value of your depreciating assets. The records you must keep are receipts or other written evidence of your expenses/purchase.

Examples of depreciating assets include:

  • computers
  • electrical tools
  • photocopiers
  • Furniture (desks, bookcases)
  • Fittings (carpets, curtains)

If your equipment costs less than $300, you can claim a full deduction for the work-related portion.

Interest, dividend and other investment income deductions

You can claim a deduction for expenses incurred in earning interest, dividend or other investment income.

You cannot claim a deduction for receiving an exempt dividend or other exempt income.

Interest income expenses

You can claim account-keeping fees where the account is held for investment purposes – for example, a cash management account. You will find these fees listed on your statements or in your passbooks. If have a joint account, you can only claim your share of fees, charges or taxes on the account. For example, if you hold an equal share in an account with your spouse, you can only claim half of any allowable account-keeping fees paid on that account.

Dividend and share income expenses

You can claim a deduction for interest charged on money borrowed to purchase shares and other related investments from which you derived assessable interest or dividend income. Only interest expenses incurred for an income-producing purpose are deductible.

If you used the money you borrowed for both private and income-producing purposes, you must apportion the interest between each purpose.

What you can claim

  • ongoing management fees or retainers and amounts paid for advice relating to changes in the mix of investment
  • a portion of other costs if they were incurred in managing your investments, such as:
    • travel expenses
    • the cost of specialist investment journals and subscriptions
    • borrowing costs
    • the cost of internet access
    • the decline in value of your computer.
  • if you were an Australian resident when a listed investment company (LIC) paid you a dividend, and the dividend included a LIC capital gain amount, you can claim a deduction of 50% of the LIC capital gain amount

What you can’t claim

You can’t claim a fee charged for drawing up an investment plan unless you were carrying on an investment business.

Some interest on money borrowed to purchase shares, units in unit trusts and stapled securities, which is attributable to capital protection under a capital protected borrowing, is not deductible and is treated as a payment for a put option.

Other Deductions

Books, periodicals and digital information

If the item cost less than $300 you can claim an immediate deduction where it satisfies all of the following requirements:

  • It is used predominantly for earning assessable income that is not income from carrying on a business.
  • It is not part of a set of assets acquired in the same income year that costs more than $300.
  • It is not one of a number of identical or substantially identical items acquired in the same income year that together cost more than $300.

If the item cost more than $300, or is part of a set that cost more than $300, you can add it to your professional library and claim a deduction for the decline in value.

Income protection insurance

You can claim the cost of premiums you pay for insurance against the loss of your income. You must include any payment you receive under such a policy on your tax return.

If the policy provides for benefits of an income and capital nature, only that part of the premium attributable to the income benefit is deductible.

You can’t claim a deduction for a premium or any part of a premium:

  • for a policy that compensates you for such things as physical injury
  • where the policy is taken out through your superannuation and insurance premiums are deducted from your super contributions.

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

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

Overtime meals

If you get paid an overtime meal allowance under an industrial instrument (such as an award) and buy food and drink on overtime, you can claim up to the reasonable allowance expense amount the ATO have set without getting written evidence.

However, you can still only claim the amount you have actually spent. If you need to claim more than the reasonable allowance expense amount, you need to keep written evidence of your expenses.

Generally, you must include amounts received as overtime meal allowances as income on your tax return. However, if your award overtime meal allowance was not shown on your payment summary and was not more than the reasonable allowance amount for each meal, you don’t have to include the amount on your tax return providing that you:

  • have fully spent the allowance; and
  • don’t claim a deduction for overtime meal expenses.

Personal super contributions

If you made contributions during the year to a complying superannuation fund or a retirement savings account (RSA) you may be able to claim a deduction for those contributions if you are between 18 and 75 years old and you are:

  • self-employed – that is, a sole trader or a partner in a partnership
  • not employed or you earn less than 10% of your total income from employment.

If you want to make (or vary) a claim for a tax deduction for personal contributions, you must provide a valid notice of intent to your super fund or retirement savings account (RSA) provider and have this notice acknowledged (in writing) by your fund.

A valid notice can be given by any of the following methods:

  • completing a Notice of intent to claim or vary a deduction for personal super contributions (NAT 71121)
  • using a form provided by your fund
  • writing to your fund, stating you wish to claim a tax deduction for your personal super contributions.

If you:

  • claim a tax deduction for a super contribution you have made, that contribution will be subject to 15% tax in the fund
  • claim a tax deduction (and it is allowed), you are not eligible for the super
    co-contribution for the amount that you claim.

Seminars, conferences and education workshops

You can claim the cost of attending seminars, conferences or education workshops that are sufficiently connected to your work activities. This can include formal education courses provided by professional associations. If attendance involves travel, you may have to show that you have reduced your claim to exclude any private portion of any trip.

Union fees and subscriptions to associations

You can claim a deduction for:

  • union fees
  • subscriptions to trade, business or professional associations.

You can only claim payments of levies to a strike fund where the fund is used solely to maintain or improve the contributors’ pay. Most unions and associations send members statements of the fees or subscriptions paid.

Interest charged by the ATO

You can claim a deduction for interest the ATO charge on:

  • late payment of taxes and penalties
  • any increase in your tax liability as a result of an amendment to your assessment
  • any increase in other tax liabilities, such as goods and services tax (GST) or pay as you go (PAYG) amounts
  • any underestimation of your tax liability when you vary an instalment for GST or PAYG.

You can claim any interest charge the ATO impose in the year in which it is incurred:

  • when you are charged the interest if your income tax assessment is amended
  • in the year in which the interest accrues on your account where there is an increase in other tax liabilities.

Self-education expenses

You may be able to claim a deduction for self-education expenses if your study is work-related or if you receive a taxable bonded scholarship. In some circumstances you have to reduce the amount of your claim by $250.

Eligible courses

Self-education expenses are deductible when the course you undertake leads to a formal qualification and meets the following conditions.

The course must have a sufficient connection to your current employment and:

  • maintain or improve the specific skills or knowledge you require in your current employment, or
  • result in, or is likely to result in, an increase in your income from your current employment

You cannot claim a deduction for self-education expenses for a course that does not have a sufficient connection to your current employment even though it:

  • might be generally related to it, or
  • enables you to get new employment.

Expenses you can claim

You can claim the following expenses in relation to your self-education:

  • accommodation and meals (if away from home overnight)
  • computer consumables
  • course fees
  • decline in value for depreciating assets (cost exceeds $300)
  • purchase of equipment or technical instruments costing $300 or less
  • equipment repairs
  • fares
  • home office running costs
  • interest
  • internet usage (excluding connection fees)
  • parking fees (only for work-related claims)
  • phone calls
  • postage
  • stationery
  • student union fees
  • student services and amenities fees
  • textbooks
  • trade, professional, or academic journals
  • travel to-and-from place of education (only for work-related claims)

Some travel for journeys cannot be claimed, but you may be able to offset the cost of these journeys against the $250 reduction. If an expense is partly for your self-education and partly for other purposes, you can only claim the amount that relates to your self-education as a deduction.

Expenses you can’t claim

You cannot claim the following expenses in relation to your self-education:

  • repayments of Higher Education Loan Program (HELP) loans (although the fees paid by some HELP loans are)
  • Student Financial Supplement Scheme (SFSS) repayments
  • home office occupancy expenses
  • meals (unless sleeping away from home), where not sleeping away from home

$250 reduction

Self-education expenses must generally be reduced by $250. While you can’t claim a deduction for the following expenses, they can be taken into account in determining whether you have to reduce your overall claim.

  • childcare
  • computer purchase
  • fares, travel or car expenses for these journeys:
    • for work-related self-education, the second leg of a trip if you went from home to your place of education and then to work, or the other way around
    • if you receive a taxable bonded scholarship and are not employed by the scholarship provider, travel from home to your normal place of education and back.

Tools, equipment and other assets

If you buy tools, equipment or other assets to help earn your income, you can claim a deduction for some or all of the cost. If the tools are used for both work and private purposes you will need to apportion the amount you claim. If you have a computer that is used for private purposes for half of the time you can only deduct 50% of the cost.

The type of deduction you claim depends on the cost of the asset:

  • For items that don’t form part of a set and cost $300 or less, or form part of a set that together cost $300 or less, you can claim an immediate deduction for their cost.
  • For items that cost more than $300, or that form part of a set that together cost more than $300, you can claim a deduction for their decline in value

Examples of tools, equipment or assets:

  • calculators
  • computers and software
  • desks, chairs and lamps
  • filing cabinets and bookshelves
  • hand tools or power tools
  • protective items, such as hard hats, safety glasses, sunscreens and sunglasses
  • professional libraries
  • safety equipment
  • technical instruments.

You can also claim the cost of repairing and insuring your tools and equipment and any interest on money you borrowed to purchase these items. If you use items for both personal and work-related purposes you need to keep records, such as a diary, so that, if requested, you can show how you apportioned the amount of private use and work-related use.