Top tax deductions you've probably forgotten about

Apr 20, 2016

You may have heard recently that you can claim your handbag on your tax bill. Like many others who have called their accountants in the past month, it may have prompted you to ask "what else can I claim this year?"

A quick scan through your wallet of receipts or around your home office would find dozens of tax deductions, but strangely some of the most lucrative and obvious ones get forgotten, tax advisers say.

Of course, they won't all apply to you, as claimable items vary based on the type of work you do, how you invest and other personal circumstances.

Having said that, there are some frequently-used items the professionals say people overlook.

Things you'll use every hour

Do you use your iPhone or iPad for work and have to pay for it yourself? You may be able to claim a deduction for work-related calls or data, says Paul Brassil, a private tax partner at PricewaterhouseCoopers.

He suggests undertaking a four week log of calls, based on your bill, and working out what portion was work and what portion was private. You claim the portion of work calls on your tax.

If your employer pays for your phone calls, but you've purchased a cover for your phone or iPad to protect it, you may be able to claim that, he adds.

Things you'll use every day

If you have a small business, you can claim a portion of your electricity bill, your internet bill and even your rent. You can claim depreciation on new computers, phones and printers up to the value of $300. Depreciation on your furniture and lighting costs are fair game, to the value of 45 cents an hour for each hour you spend in the home office.

However, this doesn't apply to people who work from home one day a week, Brassil says. You also cannot claim child minding as a tax deduction.

One of the biggest potential windfalls we've seen in recent history is the $20,000 asset write-off for small businesses, which was announced in last year's Federal Budget.

For small business owners, there is no limit on how many assets you can purchase, but beware that you will only get a percentage back and your immediate cash-flow may suffer, warns Dr Adrian Raftery, a tax adviser and senior lecturer at Deakin University.

If you drive to see clients as part of your job, you can save on tax there too, but the ways you can do it have changed.

The two deduction methods are now cents per kilometre, where you can claim 66 cents per kilometre travelled, or the trusty log book.

"It's just a minute in the morning, a minute in the evening, maybe 120 minutes over the year for potentially an extra $5000 [in tax savings]," says Raftery.

It's important to keep your receipts for petrol, insurance, registration, servicing and lease costs for the whole year, not just the log book period, he adds.

Again, don't try and claim your travel to and from work; only genuine travel you take as part of your role that is not paid for by your employer.

Things you may may do once a year or more

You may have done a self education course in the past year to improve your job skills. That's claimable. However, if you've done a course because you're sick of your current job and want to get a new one, that's not a deduction, says Brassil.

Another one people forget all the time is charity. You may have donated to a political party or a fundraiser or a door knocker. As long as you have a receipt and it's a registered charity (see the ATO website), you can claim it.

Dr Raftery says some people feel uncomfortable about claiming charitable deductions, but says the answer to that may be simply giving more to charity.

"If you put $100 into a charity and you're in the top tax bracket you'll get $49 back. If you feel funny about that, why not give $200 to charity and get $98 back?"


Where to be careful

The Tax Office can look at your deductions against the average of other people in your industry and based on that information, you may trigger an audit if you've inflated your costs.

The most important advice from the experts is don't make anything up, because you'll more than likely get caught. It's also not necessary when there are ways to save thousands legitimately.


Original article published here in The Sydney Morning Herald on 30 April 2016

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