Paying too much tax? Think tax deductions! Find out how much you can save on your tax
When you hear the term ‘tax’ you may want to run and hide and never show your face again. But never fear, we are here to talk about tax DEDUCTIONS! Mastering the art of tax deductions will bring life back to your finances and ultimately reduce the amount of tax you pay. So, step forward and begin your first step in mastering the art of tax deductions. Your journey to financial enlightenment has begun!
And more good news, the release of the 2018-19 budget includes tax deductions for low-income earners! Here’s a list of new tax deductions you can claim with the new budget:
- If you earn up to $37,000 you can claim back $200 in your tax return
- If you earn $90,000 than you could receive a maximum of $530 back
- As well as a lower tax bracket for any earners with an income of $90,000 and under
4.4 million Australians will receive a maximum benefit of $530 with a reduced income tax rate of 32.5 percent. See how much you’ll save in the next financial year with the new budget.
Now, let’s dive into a cave filled with wondrous tax deductions!
A quick guide to tax deductions
Navigating the field of tax deductions is like finding Wally in a Where’s Wally picture. You must summon the courage to begin the tremendous journey through the perils that await you, such as government websites, mindless government bureaucracy and red tape. That’s why we are here to do all the work for you! Much like with our expert loan finding service, let’s find you the right tax deductions and see how you can save.
What is a tax deduction?
A tax deduction is an expense that you can claim on your tax. Essentially, the amount of the deduction is redacted from your taxable income, and as a result, you pay less tax. You can claim pretty much any deduction that you incur when running your business.
Close up: Tax Deductions – pay less tax!
Here are some answers to frequently asked tax questions on Google:
- What is an allowable deduction?
Don’t be confused by the government labelling deductions with extra words. Allowable deduction simply means a deduction that can be claimed. The industry you’re in and what your contract stipulates will drive which deductions are allowable.
- Who can claim which deductions?
Everyone who works in Australia and is an Australian for tax purposes qualifies for tax deductions. However, most of the time, the average Australia (who isn’t fluent in tax law), doesn’t know which deductions they are entitled to. Which deductions you can claim to depend on your employment contract and how your business is structured and whether you’re self-employed.
What job-related expenses are tax deductible?
You can claim lots of work-related expenses, so get creative! Expenses you can claim will depend on your industry, however, there are some expenses that are common ground for everyone.
To see what expenses you’re eligible for, here’s a list of deductible work expenses:
- Vehicle and travel expenses
Firstly, there is a difference between work travel expenses and private work travel expenses. Unfortunately, normal travel tips between work and home are classified as private travel.
However, you can claim vehicle repairs and other travel expenses directly connected with your work, such as work business trips (also, side note – if car troubles are keeping you off the road, we can help find a personal loan lender to fix that!). So, if your boss requires that you fly to Sydney for a conference, you can claim the cost back on your tax! In other words, you can have a fabulous trip to Sydney and save on your taxes.
- Cost of travelling between two separate workplaces
- From your workplace to an alternative workplace. For example, a meeting with a client or running a workplace errand
- If you work from home and are sometimes required to travel to a workplace
- If you work at more than one site during your work hours
- Cost of travelling when you’re workplace requires you to carry bulk tools that cannot be left in the workplace
- If work requires you to travel away from home, you can claim it as an expense
- Clothing, laundry and dry-cleaning expenses
Yes, you read that correctly. You can save on your tax by simply wearing clothes to work! Well, not just any clothes, you can claim a deduction on the cost of clothes that are occupation-specific, such as uniforms and protective wear.
However, if you already receive an allowance from your employer for uniform costs, laundry or dry-cleaning, then you must declare that amount as income on your tax return.
When it comes to deducting your work clothing expenses, here’s all you need to know:
- You can claim work clothing that is occupation specific and is not considered everyday clothing. Such as chef uniforms, traddies and other professions
- You can also claim for clothing and footwear that is required for protection. For example, safety coloured vests, protective footwear, fire-resistant and sun-protective clothing and other clothing to protect yourself whilst at work
- The cleaning of your work uniform can also be claimed. That includes socks, shoes and stockings
- You can claim the cleaning costs of work clothing if the amount is greater than 150 and if your total claim for work-related expenses exceeds $300 (not including car, meal allowance, and travel allowance expenses)
- You can also claim the dry-cleaning of work-related clothing. To justify your claim, you must have written evidence
- Gifts and Donations
Besides the obvious feeling of love and kindness you receive once you give to others in need, you can also save on your taxes! So, you can feel good about yourself, help others and also save money on the side, it’s the perfect combo. Any organisation that has a DGR (deductible gift receipt) means that you can claim your donation back on your taxes. All you have to do is ask for a receipt after you generously donate and, BAM, money saved and the love is spread!
- Home Office Expenses
In some cases, you can claim deductions for bad-ass office equipment, like the latest MacBook or Samsung Galaxy. Using these devices at home for work purposes entitles you to tax deductions.
If work requires you to work from home, you can deduct home office expenses. There is a range of office equipment you can deduct, such as computers, printers and telephones. You can also claim, heating, cooling, lighting, the costs of repairs to home office products and cleaning expenses.
- Self-education expenses
More good news – if your work requires you to re-educate than you can claim the cost back on your taxes. If the course you select leads to a formal qualification then it is considered an allowable deduction. The course must:
- Improve a specific skill or knowledge you require for work
- Result in an increase of salary at your current work
Unfortunately, if the course doesn’t relate to your current work, then you cannot claim it as a tax deduction.
- Tools, equipment and other equipment
If work requires you to purchase tools to complete your job, you can claim a deduction for some or all of the costs (depending on the price of the tool). If the tool costs less than $300 you can claim the whole cost of the tool, however, if the value exceeds $300 then you can only claim a deduction for their decline in value.
Unsure if your tool is deductible? Check this list:
- Computers and software
- Desks, chairs and lamps
- Hand tools and power tools
- Protective items, such as hard hats, safety glasses, sunscreen and glasses
- Professional libraries
- Technical instruments
And more good news, if the tool breaks down, you can deduct the cost from your taxes.
- Other deductions
When you’re talkin’ tax deductions, a good rule of thumb is to assume that, if you spend your money on work expenses, you can claim it as a deduction. So, get creative! When you’re attending a work lunch, don’t forget to grab the receipt. If you need sunglasses because your job requires you graze in the sun, keep the receipt. If you’re unsure whether an expense is a deduction at the time of purchase, why not be on the safe side and grab a receipt!
- Deductions for specific industries and occupations
For a complete guide to your profession’s list of deductible allowances, see the ATO website.
Here’s a breakdown of travel expenses that you can claim:
Tax Deductions and Students
If you’re studying, don’t worry, the government hasn’t forgotten about you. You can claim tax deductions too! As we’ve mentioned above, you can deduct the cost of your course if it relates to your work. For example, if you take a barista course and work in a cafe, you can most likely claim it as a tax deduction. If your course relates to your current profession, you and claim these tax deductions:
- Course/tuition fees (Not including HECS/HELP)
- Stationery and textbooks
- Student service fees
- Union fees
- Amenity fees
- Equipment depreciation and repairs (eg. laptops computer, printer, etc.)
- Car expenses (if applicable)
That’s a lot of deductibles! So, if you’re work is hinting you should upskill, just think of the tax deductions. As always, remember to grab the receipt for any purchase whilst you’re studying.
Tax Deductions and Families
When you have 4 little rascals running a muck, needing more school uniforms and running into walls, tax deductions must be music to your ears. So, to help save money for the next family holiday, take a look at capitalising on these tax reductions:
- Take a look at your medical costs
If you spend over $2,000 in medical expenses for the financial year (which is likely if you have 4 children who love to run into things!), then you can claim 20% back on tax!
- Understand all the aspects of family tax benefits
If you are a low-income family, you can claim family tax benefits. The rates depend on how many dependents you have and whether you are a single parent family. Check out the rates at Centrelink. Or look at our information on centrelink.
- Claim child care tax rebate
The childcare rebate is a complicated one and with the new changes purposed it looks to be getting even more so. You are eligible for the childcare rebate if you use an approved child care claim and are eligible for child care benefit (the tax rebate and child care benefit will soon be merged into a single payment) and meet the rebate Work, Training, Study test.
The scheme can cover 50% of child care expenses up to the annual limit of $7,613 per child (will increase under the new scheme). So, if you’re a full time working family, then make sure you look at into the child care tax rebate to see if you can save on childcare expenses.
- Take advantage of the superannuation bumper
If you’re a low-income earner, the government will help pitch in with your superannuation. Therefore, if you earn less than $31,920 and you contribute $1,000 to your super, the government will contribute another $1,000. So, plan for your future with the government’s help!
- Get to know rent taxes
Own a rental property? Well, you can also save money on your taxes. You can claim the depreciation of the building and repairs on your taxes. It’s another benefit of owning a rental property. Don’t own a rental? We have some tips.
- Claim all the car expenses you can
When it comes to taxes it’s time to pull out the binders and unleash the organiser! If you log all your car activity, then you can claim it back on your taxes.
Let’s be friends
Ultimately taxes are here to serve the people, they are used to provide healthcare, roads, education and so much more. But we all need a break every now and again, so keep track of your expenses this financial year for maximum savings on your taxes.
We also know that emergencies aren’t planned, and that’s where we come in! Have questions about our loan service? Simply hop onto our website and send us a quick message and our loan finding specialists will get back to you.