Are you really maximizing on your tax deductions? A quick scan through your wallet or documents may unearth a treasure-trove of receipts and expenses that you may have entirely forgotten about and which may help reduce your taxable income, hence your tax obligations. Below is an overview of some of the most commonly overlooked or forgotten deductions that you can claim this tax year.
Tax Agent Fees
This is perhaps one of the most overlooked tax deductions. The fee that you pay your accountant or tax agent to prepare and lodge your tax returns is also tax deductible. If you are filing your tax returns this year, make sure that you include the fees that you paid your tax agent in the previous year.
Union or Membership Fees
Are you a member of a union or a professional association related to your profession? Do you pay a periodic membership fee to the union or association? If you are incurring any work-related membership or union fees, make sure you claim these expenses.
Asset acquisition cost write-off
The $20,000 small business asset write-off has been renewed so if you have acquired any business-related assets in the current financial year (before 30 June 2018), make sure that you claim the cost of the asset. The asset can either be brand new or second hand and must be related to your business. Please keep in mind that you can only claim the portion of the asset use that is related to your business. To be eligible, your business must have an ABN number and an annual turnover of less than $10 million. While there is no limit to the number of assets that you can purchase and still claim an asset write-off, it is important to be mindful of your business cash flow. You are only going to get a percentage back and if you over-splurge on asset acquisition, your immediate cash flow may take a hit.
Home office expenses
Do you work from home in a home office or carry some of your work home? If you do, even if it involves the periodic checking of emails, you can claim the work-related expenses that you incur when working from your premises. However, you can only claim for the duration when you are working from your home or home office so you cannot include the general cost of maintaining your home.
It is even better when you are working full time from home, either as a home-based employee or a self-employed person. You will be able to claim the “occupancy cost” for your home office and factor in all the expenses associated with running the home office such as electricity costs, cost of furniture and fittings, internet costs, computer, software, stationary costs, equipment and even a percentage of your rent or mortgage.
There are various bank-related expenses that you will incur when running your business. These include business loan and overdraft interests, business bank account-related charges and fees, and even franchise fees which do not form part of the initial purchase. You can claim many of these banking expenses as deductions so as to reduce your assessable income and get a bigger refund.
If you are utilizing pre-paid schemes in business-related expenses, your business might qualify for a few tax deductions you may have overlooked.
Self education course
If you are taking a self education course in order to improve your skills, then you can claim this as a tax deduction. However, the course must be connected or be beneficial to your current job or business. If you take a new course because you are tired of your current profession and want to try something new, that expense is not a deduction and is not claimable.
You can claim tax deductions on the following self education expenses:-
- Cost of textbooks
- Computer expenses
- Student union fees
- Accommodation and meals if the course requires that you be away from your primary residence for at least one night.
- Stationery and photocopying costs
- Any running expenses in case you have a room that is set aside for your self-education needs. These can include the costs of electricity, internet etc.
If you frequently donate money to charities or political parties, you can claim tax deduction on your donations as long as the charity is registered and endorsed by the ATO and you have the receipt to back up the expense.
Income protection insurance
Are you paying for an income protection cover to protect yourself against any future loss of income? You can claim tax deductions for the insurance premiums that you pay against a future loss of income. However, the life insurance, trauma insurance or critical insurance premiums are not claimable.
Rental property expenses
This is another category of expenses incurred by property owners that often go unclaimed. If you are incurring rental property expenses such as pest control fees, gardening and lawn mowing costs, bookkeeping and secretarial fees, property inspections and maintenance fees, travel costs incurred during rent collections, bank fees and security patrol fees, then you can claim these as tax deductions.
Laundry expenses for work wear
You can claim laundry expenses incurred in the cleaning of work-specific clothing or work wear. These can be protective clothing or a unique distinctive work uniform. You can either keep the receipts or simply compute the deductions on a reasonable basis such as $1 per load on the work-related clothing or 50 cents per load if you include other laundry items.
Work-related car expenses
Do you use your personal car for some work purposes outside the regular commute to and from work? If you do, you can claim the fuel and maintenance costs for the work-portion of the use as tax deductions. To be eligible for these deductions, you must own the car and the travel must be a part of your work day such as driving to remote working locations, driving between offices or from one job site to another.
Mobile phone tax deductions
In case you are using your personal mobile phone to make work-related calls and you are not being reimbursed for the expenses, then you can claim these costs as part of your tax deductions. The claims must be limited to those calls that are work-related and not the entire phone bill on your mobile phone.
Claim your handbag
It’s possible to claim tax deductions on your handbag if you are using it for work-related purposes. It’s an obscure claim but it can be much clearer if you have a “dedicated” handbag that you are using to carry your work laptop, business cards, client files and other work-related documents and items. If you find the prospect of carrying two bags just to claim a tax deduction unappealing, you can have a weekday bag that you can use to carry your work-related items and a weeknight or a weekend bag for a more regular use. To justify the claim even further, you can support it with documentation such as a logbook that shows proof of use.
What to watch out on
Avoid inflating your costs when claiming these tax deductions. The ATO uses powerful data matching and benchmarking tools to compare your claims against the industry average so if there is something odd about your claims, you may trigger an ATO tax audit. Avoid making stuff up!
If you need help with going after all the deductions, you can hire a professional accounting firm Melbourne to assist you in making sense of some of the deductions that you may be forgetting or leaving on the table. You could end up saving yourself thousands of dollars legitimately every tax year.