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June 2, 2021

Common Myths and Facts about Work Expense Tax Deductions

There are a lot of myths about work expense tax deductions, but some of them are more common than others. The ATO (Australian taxation office) has reported cases of tax deduction claims for various things. They include dental costs, wedding receptions, and even gambling losses, which is quite mind-boggling.

How these myths spread is unknown, but it doesn’t matter. What matters is that all claimers do their own research and debunk the common myths on tax, so they don’t make incorrect claims. Rare cases of bizarre claims aside, some myths are more common and persistent. Those are exactly the ones that we’ll be debunking below - by presenting legitimate and valid facts about the rules of tax deduction in Australia.

Myth: Taxpayers don’t need receipts, they can use the bank or a credit card statement

The Breakdown: Bank or credit card statements do not enlist all the required information. These are your spendings, time of the expenditure, and your supplier. A bank or credit card statement only shows that you spent money, and that information is not sufficient to claim a tax deduction.

Myth: You can automatically claim money on clothing, laundry, car, and work expenses.

The breakdown: Many Australians believe that they can claim $150 for clothing and laundry expenses, 5000km under a cent per kilometre for car expenses, or $300 for work-related expenses, even if you didn’t spend the money. They’re wrong. First and foremost, an ‘automatic deduction’ does not exist. Receipts for claims for work-related expenses below $300 are not necessary, and neither are claims for $150 for laundry expenses nor claims for 5,000 km for car expenses (or less ) on cents per kilometre. Whenever submitting a claim, you have to calculate it accordingly, elaborate on how you spent the funds in question, and how they relate to your income earnings.

Myth: You can claim your home-to-work travel expenses.

The breakdown: In essence, expenses on travelling work-to-home are private. Therefore, you cannot make a tax deduction claim for it.

Myth: You can claim travel expenses if you have a conference or if you add days of work to your holiday

The breakdown: If you add some work or a conference to your holiday, you need to apportion your expenses between private and work-related components. And, you can only make a claim for the work-related component.

Myth: You can claim your gym membership

The breakdown: Surprisingly, many people believe that they can claim their gym membership as a work-related expense. This, of course, is a false belief. There are some rare exceptions, like members of the special defence personnel in the Australian defence force. Or athletes - if that is their primary income source and they need to use the gym for training. To be eligible for this type of claim, your job needs to depend on you keeping a very high fitness level. Plus, you would have to be regularly tested.

Myth: If you work outside, you can claim makeup that has sunscreen in it

The breakdown: Expenses for cosmetics also belong in the category of private expenses. The only exception is if you must work outdoors in the sun, and the sole purpose of the product is sunscreen. And if the cosmetic components in it are accidental. For every other cosmetic product that contains sunscreen, this tax deduction claim can not be made.

Myth: You can claim private and work-related phone calls alongside internet usage

The breakdown: You’ll have to distinguish the work-related and private usage costs, and therefore, only claim the work-related expenses.

Myth: You can claim your work clothes expenses if you’re asked to wear a particular colour

The breakdown: If you wear plain clothes, like pants of a certain colour, for example, you can not make a claim. Even if your boss instructed you to put them on. You can only make a claim for a tax deduction if you wear a specific uniform that is unique and distinct to the company that employs you—for example, wearing a shirt with the company logo.

Conclusion

Those are the most common myths about work expense tax deduction, but there are many others. Unfortunately, taxpayers are accepting advice from different sources, and many of them are wrong. This quickly leads to incorrect claims.

That is why taxpayers are encouraged to do proper research and get their information on tax deductions from reliable sources. Such include officials or their personal accountants who can assist them when making their tax returns.

All in all, assumptions and false information are foes more than they’re friends. If you care to learn Australian tax deductions inside-out, it's crucial that you do your homework on the topic.

For more information, guidance and advice, visit CapTaxation and contact our advisors!