Save with Tax Deductions

  By Mark Chapman

Tax time is not far off and whether you plan to use an agent to complete your return or do it yourself, it’s vital that you claim deductions for everything that you’re entitled to. Here’s a hit list of some of the tax deductions you might not have known you could claim that could end up saving you big this tax time:

Professional memberships and subscriptions:  If you’re a member of a professional or trade association as part of your work, you can claim a deduction for the amount you pay in subscriptions. This also covers union fees if you’re a member of a trade union, as well as subscriptions to trade or professional magazines.
Don’t forget, if you prepay your fees or subscriptions for next year before 30 June, you can claim a deduction this year, which can be a useful timing benefit.
Rental Property Expenses: Most people with a rental property know that you can claim a deduction for the interest element of the mortgage but there are plenty of other deductions you can claim on a rental property, many of which are often overlooked. So, if you’ve paid out for any of these costs this year, make sure you claim a deduction:

• Gardening and lawn mowing 
• Bank fees
• Pest Control
• Security Patrol fees
• Bookkeeping/Secretarial Fees
• Maintenance and repairs
• End of lease cleaning costs
• Letting agent fees, including marketing 

A handbag: If you use a bag for work purposes – e.g. to carry iPads, phones, calculators, stationary or anything else you need for work, you can claim a deduction for the cost of the bag. Be careful though; the handbag needs to be fit for work purposes and actually used for work purposes. You might struggle to claim that new Gucci bag but a more modest bag – genuinely used only for work purposes – should be claimable. For men, a work briefcase, satchel or backpack should also be claimable.
Income Protection Insurance: If you pay for insurance premiums against loss of income, those amounts are tax deductible. But be careful; that doesn’t include life insurance, critical care insurance or trauma insurance. It also excludes policies paid for out of your superannuation contributions.
Travel: If you travel as part of your work, you can claim the costs of your work-related journeys such as the cost of visiting clients or suppliers. If you use your own car, either claim 85 cents per kilometre up to a maximum 5,000 kms or keep a logbook and claim your actual expenses. You can also claim for parking, tolls and public transport if you don’t use your car.
Mobile Phone Expenses:  If you use your personal mobile phone for work – either to make or receive calls – you can claim the cost of these calls as a deduction. You can only claim business related calls so in order to work out the split between business and personal use, keep a diary for at least four weeks in order to work out the business use proportion. For example, if you have a $100 monthly mobile phone plan and you determine – based on your diary – that 25 per cent of your calls are work related, you can claim a deduction for $25 per month, or $300 per year.
Similarly, if you use your home internet service to deal with work related matters, such as responding to work emails, you can also claim a proportion of those costs. Remember, keep a diary!
Home working costs If you work from home, either occasionally or all the time, you are entitled to deductions for costs arising from working at home. The expenses that you can claim include:

1. heating, cooling and lighting
2. cleaning costs
3. decline in value (depreciation) of home office furniture and fittings, office equipment and computers (for items over $300)
4. computer consumables, stationery, telephone and internet costs 
5. items of capital equipment (for eg furniture, computers and associated hardware and software) which cost less than $300 can be written off in full immediately.

You can’t claim for things like tea, coffee and toilet paper, which would be provided if you work in an office, but are actually private expenses when bought for home.
You can claim actual costs but you’ll need copies of all invoices plus a reasonable estimate of the percentage split between work-use and private-use. Or, alternatively, use the ATO fixed rate of 67 cents per hour. 
Don’t forget, to claim the fixed rate, you must be able to prove the number of hours that you worked from home during the entire tax year, so you’ll need a diary, copies of timesheets or rosters. 

Important: you can’t make a separate claim for mobile phone use if you have claimed the fixed rate method for working from home. Mobile phone calls – wherever they are made – are included in the 67 cents per hour rate.

Social functions. As a general rule, the ATO won’t let you claim tax deductions for a night out. The exception is where attending the function is actually part of your work. An example would be where a journalist attends a function that they will later report on through their media outlet; in that case, a deduction can be claimed.
Gym memberships. The ATO takes quite a hard line around deductions relating to personal health and fitness but there are a few people who are entitled to claim gym memberships, typically those who require a level of fitness well above the norm. Examples might include professional sportspeople and those defence force personnel who perform duties designed to keep them in tip-top shape, such as members of the special forces.
An apartment in another city. Of course, if you own an investment property, you can claim deductions against the rental income but did you know that in some cases you can claim deductions against a place you live in yourself? Under recent guidelines issues by the ATO, if you’re required to work away from home by your employer, your assignment in the other place is only temporary (so you haven’t actually relocated) and you choose to rent or buy an apartment in the other work location rather than relying on hotels or motels, you can claim a deduction for the work-related costs relating to the apartment, including either rent or interest on the mortgage, depending on whether you rent or buy.

About the author:  Mark Chapman is the Director of Tax Communications at H&R Block Australia.