01.CHOICE's tax tips
Budgets are stretched and times are tough for many people. But there are simple ways you can reduce your taxable income to save money. The most important thing to remember, though, is to keep the receipts for all the expenses you claim.
Please note: this information was current as of April 2008 but is still a useful guide to today's market.
You can claim some deductions for expenses incurred while performing your job. You need receipts if the total of your work-related claims exceeds $300. That limit does not apply to claims for car, meal allowance, award transport payments allowance and travel allowance expenses.
Some work-related expenses that you may be able to claim, depending on your circumstances, include union fees, overtime meals, formal education courses provided by professional associations, seminars, conferences or education workshops, books, journals and trade magazines, tools and equipment, protective items such as sunscreen and sunglasses, computers and software, and telephone and home office expenses. If you buy income protection insurance, the premiums can also be claimed as a deduction. Life, trauma and critical illness insurance, however, are not tax deductible.
While things such as magazines and CDs may be deductible, it’s important to note you can only claim for what’s directly relevant to your job or income. According to the Australian Taxation Office (ATO) website, “a truck driver can claim a deduction for a subscription to Australian Truckie magazine but cannot claim a deduction for subscribing to magazines with no specific occupational focus – for example, Wheels magazine.”
Some bank fees are deductible; the key is whether the fees are connected to your ability to earn income or access your income. If you pay ATM or over-the-counter fees to withdraw your income from your account, they’re deductible, as are any monthly fees for a savings account that generates income for you.
On the other hand, according to Michael Dirkis of the Taxation Institute of Australia, if the account is simply a way for you to pay your bills and other expenses and it doesn’t earn interest, the fees involved can’t be claimed. Similarly, if you pay a single annual fee for a banking package (home loan, credit card, transaction account) it’s unlikely that fee is deductible.
Donations to charity
Monetary donations of $2 or more to charity may be claimed as a tax deduction, provided the organisation has deductible gift recipient (DGR) status, which you can check at the ABN Lookup website at www.abr.business.gov.au. However, not all payments to charities can be claimed. For instance, you can’t claim charity raffle tickets, the purchase of items such as pens and chocolates, or the cost of attending a fundraising ball.
You can claim the cost of buying, washing, drying and ironing eligible work clothes, including laundromat expenses and dry cleaning. Examples of eligible clothes are work uniforms, protective clothing required for your job and occupation-specific clothes such as the checked trousers chefs wear. See “Claiming a deduction for work clothing” at www.ato.gov.au for details.
If the clothes are eligible, you can even claim for the cost of the washing, drying and ironing you do yourself; the ATO considers $1 for a full load of work clothes to be a reasonable basis for working out your laundry claim. If you choose a different basis to work out your claim, you may be asked to explain that basis. When the amount of your clothing expenses claim exceeds $150, the ATO requires written evidence such as diary entries and receipts.
Go to www.ato.gov.au/individuals to find further expenses you can claim to reduce your taxable income. You can do your own tax return for free, and the ATO says refunds are usually paid out within 14 days.
Otherwise, see a registered tax agent, who typically charges about $100 for an individual’s simple tax lodgement – and that fee is tax-deductible in next year’s return.