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Common Deductions Employees Can Claim: A Guide for Australian Individual Taxpayers

Article By Marlene Smith | | Accounting & Tax

With 30 June behind us, it’s time to start thinking about your 2024 tax return. For individual taxpayers and employees in Australia, understanding the various deductions available can make a significant difference in your tax outcome. This article will explore common deductions you can claim, helping you maximise your refund.

Records are important to substantiate your deduction claims. Ensure you keep suitable invoices, logbooks or other allowable evidence for your claims. The ATO may ask to see these records if they review your tax return.

Home Office Deductions

With the rise of remote work, home office deductions have become increasingly relevant. If you work from home, you may be eligible to claim expenses related to your home office. This can include:

  • Running Expenses: These are costs incurred from using your home office, such as electricity, heating, cooling, and cleaning.
  • Internet and Phone Usage: You can claim a portion of your internet and phone bills if they are used for work purposes.
  • Depreciation of Equipment: Items like computers, printers, and office furniture can be depreciated over time.

There are two methods to claim these expenses, namely the fixed rate method and the actual cost method. The fixed rate method uses a rate of 67 cents per hour worked from home to claim the home office expenses. Whereas the actual cost method requires detailed records of the expenses being claimed, including documentation to substantiate the work-related use of items such as phone and internet expenses.

For further details on the Home Office Deductions and relevant recordkeeping required for each method, read our article “Simplified Home Office Deductions: What can you claim and what recordkeeping is required?”.

Motor Vehicle Deductions

**Important**  If your vehicle is provided to you under a salary sacrifice/novated lease arrangement, no deduction can be claimed for motor vehicle expenses. Under this arrangement, you are already receiving a tax benefit, therefore, deductions for this vehicle in your tax return would be double dipping. The ATO can track salary sacrificing arrangements through the information your employer submits.

If you use your car for work purposes, you may be eligible to claim motor vehicle deductions if you meet all the following criteria:

  • Your vehicle is a car. For this condition to be met, the vehicle must carry a load of less than 1 tonne, carry fewer than 9 passenger and not be a motorcycle.
  • You own or lease the car. If the vehicle is provided to you under a salary sacrifice or novated lease arrangement, then it will not meet these criteria and therefore you will not be eligible to claim motor vehicle deductions for the use of this vehicle.
  • The Motor Vehicle expenses are for work-related trips. The trip is generally not work-related if it is for your commute to and from work.
  • You personally incurred the expense. Your employer did not reimburse you for the expenses incurred for the use of the vehicle.
  • You must keep the required records.

If your employer pays you a motor vehicle allowance, you must include this in your assessable income in your tax return and may continue to claim the motor vehicle deductions.

Your motor vehicle deduction can be calculated using one of the following two methods:

  • Cents per Kilometre Method: You may claim up to 5,000 work-related kilometres per car at 85 cents per kilometre. This method covers all car expenses such as: depreciation, registration, insurance, fuel, repairs, and maintenance. The records required for this method are proof that the vehicle is a car and a how you calculated to work-related kilometres (e.g. diary or using the myDeductions tool in the ATO app).
  • Logbook Method: By maintaining a logbook for 12 continuous weeks, you can claim a percentage of your total car expenses, including fuel, maintenance, insurance, and depreciation. Once you keep a logbook, this logbook will be valid for 5 years as long it remains representative of your work-related use. In addition to the logbook, you will also need to keep all receipts of your car expenses.

Deductible Donations

Making donations to registered charities can be a noble way to reduce your taxable income. To claim a deduction for donations:

  • Donation Requirements: Donations must be $2 or more and made to an organisation registered as a deductible gift recipient (DGR).
  • Receipts: Keep receipts for all your donations as evidence for your claims.

Remember, you can only claim donations made in the current financial year on your 2024 tax return.

Other Common Deductions

In addition to the above, there are several other deductions individual taxpayers can claim, including:

  • Work-Related Clothing: The cost of purchasing or repairing a compulsory uniform, occupation-specific or protective clothing required for your job can be claimed as a deduction against your taxable income. Additionally, you can also claim the laundry expenses of this clothing at a rate of $1 per load if it only contains work clothing or 50c per load if it contains a mix of work and personal clothing.
  • You need to keep the receipt for any of these expenses incurred that shows the name of the supplier, the amount spent, the nature of the items purchased, payment date and the date the receipt was produced. To claim a deduction for laundry expenses (washing and drying), you are required to keep written evidence of how you worked out your claim if the laundry expenses exceed $150.
  • Self-Education Expenses: If the education is directly related to your current employment, you can claim expenses such as course fees, textbooks, and stationery.
  • Union Fees and Subscriptions: Fees paid to unions or professional associations related to your employment.
  • Voluntary Superannuation Contributions.If you personally made super contributions throughout the year, you may be able to claim a deduction. To do so, you will need to provide a notice of intent to claim form to your super fund. If you are interested in utilising this deduction, we highly recommend to discuss this with your financial advisor to ensure that all possible impacts are taken into account.
  • Other Expenses incurred in connection to earning your income. If you consider any expense to be incurred in relation to your employment, keep the invoice and tell us about it when we prepare your 2024 tax return. We will help you determine if it is deductible.

Conclusion

Understanding and claiming the right deductions can significantly impact your tax return. By taking advantage of home office deductions, motor vehicle deductions, donations, and other work-related expenses, you can maximise your refund and ensure compliance with the ATO. Remember to keep detailed and accurate records of all your expenses to support your claims on your 2024 tax return.

For more detailed guidance and support, reach out to our team of experienced accountants. We’re here to help you make the most of your deductions and optimise your tax return.