While some people test their luck by making outrageous work-related deduction claims, the expense must meet a strict criteria for it to be approved. As tax time approaches in July, the ATO has reminded Australians that exaggerated deduction attempts will not be tolerated. This year they will focus on areas they see frequent errors, including work-related expenses, working from home deductions and in respect to multiple income sources.
What can you claim as tax deductions?
Work-related expenses must have a close connection to your income earning activities. Expenses that are personal in nature - such as travel to and from work, or childcare costs - cannot be claimed.
If in doubt about what you can or can’t claim, check the ATO website for detailed guidance or speak to your registered tax professional. Don’t just claim it and hope for the best as penalties and interest may apply.
Working from home deductions
Working from home deductions are one of the most-claimed work-related expense each year. There are two ways you can calculate your deduction for additional expenses you incur by working from home. They are the:
Fixed rate method - this method allows you to claim 70 cents for every hour you work from home and covers your additional running expenses that are often difficult to apportion, like internet, phone usage, electricity and stationery.
Actual cost method - with this method, you must have records of all the expenses you claim, and the work-related use of your expenses to back up your deduction.
Remember, you must have records to prove you incurred additional expenses due to working from home.
Proving your deductions
Be prepared to back up all claims with records like a receipt or invoice.
Paper receipts can frequently get lost, so the ATO recommends you use the myDeductions tool on the ATO app to easily keep records of your work and general expenses.
Different sources of income
Remember to declare all sources of income on your tax return. This includes side-hustles, for example if you are providing ride sourcing services or selling services via an app.
Each source of income you have will have different deductions available to you, depending on the nature of the income and your occupation.
For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.
Source: ATO