By Tatum West

$300 million. That’s the amount of unclaimed tax Australians are missing out on every year. There are far too many people not claiming all the tax deductions they are entitled to and therefore, handing over more money than necessary to the government.

On the other hand, it’s important not to get too carried away and overstate your deductions as that will only land you in hot water in the event of a tax audit.

Tax is complex and being across all the deductions you can claim is nigh on impossible without expert help. But to give you a head start, I’ll cover some of the most common tax deductions people are unsure about.

If you’re not sure if something is deductible, consult your accountant, but here is a good general approach. Ask yourself if an expense is a genuine cost of earning your income, make sure you have documented evidence of the expense.

With that said, let’s get on with it.

Work related car deductions.

Work travel is an umbrella covering many possible tax deductions. The first thing to clarify is that driving to and from work is not tax deductible. It’s something most of us have to do, so the ATO has classified this as a personal expense, and not directly related to your income.

However, if your work-related car travel lands outside the norm, there may be possible deductions. For instance, if you have multiple offices you need to use your car to travel between in a single day, or multiple places to visit as part of your job, this travel can be tax deductible.

You should be able to demonstrate to the ATO (in the event of an audit) how you came up with your estimate of the kilometres you’re claiming. Example: you travel to see clients within a ten-kilometre radius of work, ten times a week. Average that out over the year.

What evidence you will need to claim this deduction?

You may need to keep a record of:

• Written evidence for your car expenses (receipts or invoices)
• your car logbook and odometer records.

Please consult us to understand more about this type of deduction.

Work related travel deductions.

If you have incurred meal, accommodation, and any incidental expenses while you travelled and stayed away from your home in the course of performing your work duties. You can keep all the receipts and written evidence to claim deduction under this category. Always ensure that you have paid for the expenses yourself and have not been reimbursed.

If you in receipt of travel allowance, generally you need to keep records of your travel allowance expenses as evidence to support your travel deduction claim however, you may not need to keep receipts or a travel diary for instance, a receipt for every item or taxi ride or hotel room, for travel allowance expense claims within the reasonable travel limits.

What is the reasonable travel limit? It’s set by the ATO every year, and it’s determined by location. For instance, Sydney might have a higher travel limit than Adelaide, because it’s a more expensive destination.

Working from home deductions.

During the COVID-19 pandemic and the resulting lockdowns, the tax office was quite relaxed about Work from Home expense claims. But ATO has now changed the way taxpayers can claim these deductions.

You need to keep a record of all the hours you work from home. Easier way to do this is to make a habit of entering it into your computer’s calendar each day.  The least you can try to keep a record of a representative period and multiply it out for the year. It’s all about being able to demonstrate how you came up with the figures.

There are two calculation methods you can choose between when claiming home office expenses. One is the revised fixed rate method, and the other is the actual cost method. How you claim and what you claim depends on which method you use, so it’s best to discuss this with your Tax Agent/Accountant.

What work-related training or education can I claim?

Firstly, you can’t claim any courses or training that is put on your HECS-HELP debt. You can, however, claim work-related training or courses that are paid for up front and in full. You can also claim tax deductions on FEE-HELP and VET Student loans.

Clothing and laundry

It may not seem like it, but tax deductions are usually very logical. Clothing is one such area. If you have bought occupation-specific clothing or work uniforms, you will probably be able to claim that cost, as well as the cost of maintaining them (i.e., laundry). It may be different for work uniforms that aren’t compulsory. If, however, your company has ‘guidelines’, such as you must wear black pants and a white top, then that most likely will not be claimable.

Investment income

It is possible to claim certain tax deductions on expenses related to:

• Dividends from shares
• Interest payments on savings
• Rental payments from investment properties
• Another investment sources.

You don’t know what you don’t know.

What you can claim depends on how you earn your income and the related expenses, but claims must be consistent with the ATO rules.  These rules keep changing.  So, what you claimed in the past may not be allowable now, or there may be new deductions, or the claiming methods may have changed.

That’s why it’s so valuable to seek the help of a tax specialist who can give you the best advice based on your circumstances. But given the millions that are left on the table by Australians every year, chances are you’re not claiming everything you’re entitled to.