As we are getting closer to the end of the 2019-2020 financial year it is important to recap what tax deductions you can and cannot claim. To make things easier there are a few general rules that apply to most deductions you can make. Your expenses will be claimable if:
- It was a work-related expense
- There is an official record of the expense like a receipt or bank statement
- The money was not later reimbursed by your employer
So, with that in mind here are some of the most common claimable expenses and some which are often overlooked.
While you may only be able to claim expenses that are directly related to your earnings, there are some expenses that are both work-related and personal. Often these include phone bills, internet bills, your phone, your computer, and more. For these expenses, you can only claim part of the cost as a deduction. You will also need to show the ATO how you worked the work-related/ personal split out.
Work expenses you can claim
Some work expenses you can claim includes:
- Clothing, laundry and dry cleaning
- Vehicle and travel expenses
- Self-education expenses
- Tools, equipment and other work-related assets
- Books and digital information
- Cash shortages or client bad debts
- Mobile phone and internet expenses
- Protective glasses, glasses, contact lenses
- Working with children checks
- Income protection insurance
Industry-related tax deductions
Which tax deductions you can claim will vary from industry to industry. Often one person who works in retail may be able to claim clothing that has the company logo on it as a tax deduction, while one person in the fitness industry cannot claim their clothing due to them being non-branded. But person 2 could claim other unique deductions for their industry. If you want more advice on industry-related tax deductions, talk to your accountant.
Claiming without a receipt
You should collect a receipt for all work-related expenses. Not collecting and keeping a receipt is an expensive mistake. While anything up to $300 can be claimed without a receipt it is a good idea to have a system in place for collecting and keeping receipts for work-related expenses. This way, you can avoid any future troubles.
Businesses have their own unique rules when it comes to tax deductions. This includes freelancers and those who are self-employed. However, like individual tax deductions, these expenses also must not be for private use, and you must keep records to prove the expenses. Expenses you can claim include:
- Home-based business
- Motor vehicle expenses
- Business travel
- Workers’ salaries and super contributions
- Repairs, and maintenance
- Other operating expenses
- Carbon sink forest expenses
- Depreciating assets and other capital expenses
For more information talk to your accountant today.
Keeping track of receipts
Keeping your receipts is vital to getting the most out of your deductions. You should keep the receipts for all work-related expenses for between 2 to 5 years, depending on the expense. While keeping them in a shoebox may work if you only have 1 or 2 work-related expenses a year, most people need a more robust solution. Fortunately, there are some great solutions including:
- Colour coded folders, with data from each receipt entered into a spreadsheet like Google Sheets.
- You can also scan and save the copies of your receipts digitally in Google Drive or OneDrive
- The ATO’s MyDeductions app allows you to record expenses and income. You can even take pictures or screenshots of receipts and upload them to the app.
As the end of the financial year gets closer it is a good idea to begin preparing. Now is the time to ensure your receipts are in order to avoid a big rush at the end of the financial year. It is also a great time to brush up on which deductions you may be able to claim. If you are unsure as to which industry-specific deductions, you may be able to claim you should talk to your accountant before you submit any claims at the end of the financial year.
For help on tax deductions for your small business talk to Link Advisors today.