Tips for tax deductions

What you can claim on your 2022–23 tax return

Many of us now follow a hybrid mix of working in the office and at home. Not only has this changed the way we live and work, but it also means amendments to the tax rules, including what you can claim on your tax return and how. Here’s a brief guide to help with your end of financial year.

A matter of tax records

The first thing to know: good record-keeping is essential when it comes to claiming tax deductions against your assessable income. Get into the habit of regularly filing receipts and documentation so you’re less likely to miss things you’re entitled to claim for. Remember you’re required to keep tax records, such as work or business-related receipts and timesheets, to back up any tax deductions you claim.

Digital record-keeping is much easier than organising paper. Download the free MyDeductions app from the Australian Taxation Office (ATO) website, which can help you keep up-to-date with the process.

Tip: Remember you need to keep your tax records for a minimum of five years.

Tax deductions for working from home

If you’re working from home and incurring additional expenses such as heating and lighting, you can claim back these costs in one of two ways: the revised fixed rate method and the actual cost method.

With the revised fixed rate method, you can claim 67 cents each work hour for energy, phone and internet usage, as well as office necessities such as stationery. To claim this on your tax return, you don’t need to have a dedicated home office, but you’ll need to record how many hours you worked from home, as well as have proof of what you spent. You only need one bill or receipt for each expense, such as a phone bill or product receipt.

The actual cost method also lets you claim the additional expenses of working from home, but only the work-related part of it, which can include having to calculate the unit cost of your electricity and the average usage. Nevertheless, this could be a better option for your particular circumstances, so it’s worth checking out the information on the ATO website or talking the options through with your accountant or tax agent.

What you can claim on your tax return

If you’re an employee working from home, you might be able to claim for the purchase of items needed to carry out work (a laptop, for example), provided you spent the money and weren’t reimbursed.

Tip: You can only claim the work-related portion of items, so if you also use them for personal use (for example, you use your laptop to stream movies), you’ll need to calculate the time spent on work and private use.

Businesses can also claim a tax deduction for items needed to carry out their business – for a Tradie, that might be a set of tools or safety equipment, for example. Expenses need to be directly related to earning your assessable income and the same rule applies – you can only claim the portion that is used for your business. For instance, if your vehicle is used for both work and private travel, you can only claim the work portion, and you’ll need to keep a logbook to detail usage.

There are different ways to claim the expense of an asset purchase on your tax return. If the item costs $300 or less, you can claim the whole amount at once. If it costs more than $300, you can claim it back over a number of years, a process known as decline in value or depreciation.

Eligible businesses (not employees) may also be able to claim the whole cost of a business-related asset purchase at once, under temporary full expensing rules, which were brought in under COVID. To qualify, the asset must be used or installed ready for use by the end of June 2023.

EOFY 2023’s best of the rest

The ATO has some great information available on common tax deductions employees can claim at tax time, including work-related deductions for your specific occupation or industry. This includes information about occupation-specific clothing, vehicle and travel expenses. It’s important to note all expenses should be work-related – you can’t claim private expenses, such as food costs when working from home.

For a wide range of information on tax time essentials for small businesses, have a look at the ATO’s supporting your small business.

Keep in mind...

This is a general overview. Please check the ATO website and consult a tax professional, as details between businesses and employees can and do vary. This information is of a general nature only and should not be regarded as tax, financial or legal advice. It does not take into account your individual circumstances or objectives. You should not act on the basis of this information without first obtaining advice from a suitably qualified professional advisor.

Are you a Tradie or business owner?

Check out our guide for more information on what you can claim this financial year

Photo Credit: Cath Muscat, Getty Images