Top 5 overlooked tax deductions

What are the top 5 forgotten deductions on individual tax returns? – That is, deductions people can claim, but often forget or don’t know about.

Surprisingly, our accountants agreed that tax agent fees are the most regularly forgotten tax deductions each year. According to the ATO’s guidelines, you may be able to claim a deduction for the cost of managing your tax affairs, which includes fees paid to a registered tax agent or accountant. However, there are specific conditions that must be met for this deduction to be applicable. For example, the fees must relate to the preparation and lodgement of your tax return or the provision of tax advice. Additionally, you need to ensure that the fees you’re claiming as deductions have not been reimbursed or are not expected to be reimbursed by your employer or any other party.

It’s important to keep records and documentation of the tax agent fees you have paid, including receipts or invoices, in case the ATO requests evidence to support your claim. It’s strongly recommended to seek advice from a professional tax agent or accountant who can assess your individual circumstances and provide personalized guidance on what expenses are deductible for your specific situation.

In Australia, union or membership fees may be tax deductible in certain circumstances. The deductibility of these fees depends on whether they are directly related to your employment and if they are incurred for the purpose of producing assessable income.

To determine the deductibility of union or membership fees, you should consider the following factors:

• Nature of the union or membership: The union or membership should be relevant to your employment or profession. It should have a clear connection to your work-related activities.
• Employment-related benefits: If the union or membership provides you with specific employment-related benefits, such as negotiating wages and working conditions, it strengthens the case for deductibility.
• Apportionment: If your union or membership provides both employment-related and non-employment-related benefits, you may need to apportion the fees and only claim a deduction for the portion that is work-related.

It’s crucial to consult with a qualified tax professional or refer to the Australian Taxation Office (ATO) for specific guidance on the deductibility of union or membership fees based on your individual circumstances. Tax laws and regulations can change over time, so it’s essential to access the most up-to-date information from the ATO or seek professional advice.

If you are required to use your personal car for work-related reasons, apart from driving to and from work, you can usually claim fuel and maintenance costs as a tax deduction. There are two methods for calculating this deduction – you can either keep a 12-week logbook (which generates numbers you can reuse for 5 years!) or the cents per kilometre method.

The ATO defines work-related kilometres as kilometres travelled in your car while you are earning your income. To be eligible, you must be the owner of the car and your travel must be part of your working day – e.g. driving between offices, special trips to the post office or bank (not including stop-offs on the way home) or moving from one job site to another. Remember, you cannot claim trips between work and home unless you’re carrying heavy equipment for work, or transporting heavy tools required to do your job.

However, it’s important to note that the rules and requirements for claiming work-related car expenses can be complex, and they depend on various factors. Here are some key points to consider:

• Deductible Expenses: You can generally claim deductions for expenses related to using your car for work purposes, such as fuel, repairs and maintenance, insurance, registration, and depreciation. However, you can only claim the portion of these expenses that is directly attributable to work-related use.
• Types of Work-related Car Use: To claim car expenses, your car use must be directly connected to your employment and meet certain conditions. This includes travelling between different work locations, visiting clients or customers, and performing work-related tasks such as delivering goods or attending meetings outside your regular workplace.
• Record-keeping: It’s important to maintain accurate records to substantiate your car expenses. This includes keeping a logbook to record your work-related and private use of the car, as well as retaining receipts, invoices, and other relevant documents for expenses incurred.
• Calculation Methods: There are two methods to calculate work-related car expenses: the logbook method and the cents per kilometre method. The logbook method requires keeping a logbook for at least 12 consecutive weeks to determine the business-use percentage of your car expenses. The cents per kilometre method allows you to claim a set rate per kilometre for work-related travel up to a specified limit.

It’s advisable to consult with a qualified tax professional or refer to the Australian Taxation Office (ATO) for specific guidelines and requirements regarding work-related car expenses. They can provide personalized advice based on your individual circumstances and help ensure that you comply with the relevant tax laws and regulations.

You may be eligible to claim home office expenses as a tax deduction if you use part of your home for work-related purposes. The key points to consider when claiming home office expenses include:

• Eligibility: To claim home office expenses, you must have a dedicated area in your home that is exclusively used for work-related purposes. It should be a space where you conduct your work or carry out administrative tasks.
• Running Expenses: You can claim a portion of your running expenses, such as electricity, gas, water, and internet bills, based on the proportion of your home that is used for work. This proportion is typically calculated by dividing the total area of your home office by the total area of your home.
• Occupancy Expenses: If you are a tenant, you may be eligible to claim a portion of your rent as a deduction. For homeowners, you can claim a portion of your mortgage interest, property insurance, and council rates.
• The decline in Value (Depreciation): If you use assets such as furniture, computers, or other equipment in your home office, you can claim a deduction for their decline in value (depreciation) over time. The depreciation deduction is typically spread over the useful life of the asset.
• Record-keeping: It’s crucial to maintain accurate records to support your claims for home office expenses. This includes keeping records of your bills, receipts, and other relevant documents that demonstrate the expenses incurred.

It’s important to note that the ATO has specific guidelines and requirements for claiming home office expenses. These guidelines may change over time, so it’s recommended to consult with a qualified tax professional or refer to the ATO’s official website for the most up-to-date information and eligibility criteria for claiming home office expenses. They can provide personalized advice based on your specific circumstances and help ensure that you comply with the relevant tax laws.

You may be eligible to claim a tax deduction for your mobile phone expenses if you use your mobile phone for work-related purposes. Here are some key points to consider regarding mobile phone deductions:

• Work-Related Use: To claim a deduction, you must demonstrate that you use your mobile phone for work-related purposes, such as making or receiving work-related calls, sending work-related messages or emails, or using work-related apps or data.
• Apportionment: If you use your mobile phone for both work and personal purposes, you can only claim a deduction for the portion of expenses that relates to work use. You will need to apportion your expenses based on a reasonable estimate, such as the percentage of work-related calls or data usage.
• Documentation: It’s important to keep records to support your claims for mobile phone expenses. This can include itemized bills or statements that detail work-related calls, messages, or data usage. Additionally, you should retain any other documentation that shows the connection between your mobile phone use and your work.
• Substantiation Methods: There are different methods for substantiating mobile phone expenses. You can use the actual expense method, where you calculate the actual costs incurred for work-related use, or the fixed-rate method, where you claim a set rate per work-related call or message. The ATO provides specific guidelines on these methods, including the applicable rates.

Certain expenses related to taxation, such as tax agent fees, union/membership fees, work-related car expenses, and mobile phone expenses, can be eligible for tax deductions in Australia. However, the specific eligibility criteria, documentation requirements, and calculation methods vary for each type of expense. It is essential to consult with a qualified tax professional or refer to the Australian Taxation Office (ATO) for up-to-date and accurate information regarding tax deductions. They can provide personalized guidance based on your individual circumstances, ensuring compliance with the relevant tax laws and regulations. Keeping accurate records and maintaining documentation is vital to substantiate your claims for deductions and support your tax returns.