Everybody wants to maximise their tax return by claiming as many deductions as possible. However, some deductions are definitely not allowed, even though it’s widely assumed that they are. Here are four that you should watch out for.
Laundry picture from Shutterstock
The Australian Taxation Office (ATO) has said it will be looking at inappropriate deductions across all industries this year, so you need to make sure your claims are legitimate. When in doubt, check the rules carefully, and seek professional advice if necessary. One common theme across most of the items we’ve discussed here is that you can’t claim for an expense if your employer has already reimbursed you for it.
Laundry costs
You can usually only claim laundry costs if you have to wear a uniform to work — and it generally only qualifies as a uniform if it has a specific mandated design and features a company logo, or is essential for your safety. No matter how snazzily your boss tells you to dress, a suit doesn’t qualify. Here are the guidelines for how to calculate laundry expenses if you are eligible.
Health insurance
The cost of health insurance isn’t something that you can deduct directly from your taxable income, but if you don’t pay for private health insurance, you will end up being slugged with extra penalty tax. So make sure you choose an appropriate plan if you haven’t already got one (there are lots of discounts on offer at this time of year to attract laggards).
Unlimited phone plans
If you have an unlimited phone plan but use it to make work calls, you may be tempted to claim the entire cost: after all, you can’t make a single call without paying for the entire plan. However, the Tax Office stance on this is clear: you can only claim a proportion of the cost, since the connection can also be used for private calls. Keep a diary to establish your usage, and claim a percentage based on that.
Charity donations that aren’t gifts
You can claim donations to charity against your taxable income, but only if you don’t receive anything in return. The Tax Office definition of gifts makes it clear that if you receive a raffle ticket; a chocolate, pen or similar item; or a meal, then it isn’t a donation and you can’t deduct it.
Any self-education expense
You can claim some self-education expenses, but only if the costs of the course or training involved have a “sufficient connection” to your current role. In other words: if you’re training for an entirely different role, you can’t claim any deductions.
Reminder: For specific tax advice relating to your individual situation, consult a registered professional.
Jeremy Cabral is the Publisher at finder.com.au, helping over 4.8 million Australians compare financial products every year. Connect with Jeremy on Google+, Twitter and LinkedIn.
Comments
9 responses to “Five Deductions You Can’t Claim In Your Tax Return”
Pet Hates of an Accountant
1. When a client brings in an unsorted shoebox of faded/torn/irrelevant receipts. Bonus hatred if it all smells like diesel.
2. If an accountant gives you advice, it is usually correct. Contradicting them with “but Johnny down at the pub said I could claim this” just upsets everyone.
3. If an accountant ask you to provide additional information, don’t reply with “I already gave you that”. If I’m asking, it means I haven’t been able to find it.
Recently went to a charity dinner/ball and they were pretty adamant that you could claim it.
The people who sold you the ticket?, yeah, they’re going to say that.
edit/
And here’s the link to the ato page that says they’re not:
https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Gifts-and-donations/
Does it have to be a registered charity? Do I need a receipt?
If you give money to monks at a temple, they use it pay electric bills etc. but you usually don’t get a receipt.
I thought they use candles?
They have to be registered as a DGR (deductible gift recipient) in order to claim the donation as a tax deduction.
I never claim donations on tax, to me it seems against the spirit of donating in the first place.
WHat it means is you get to donate form your pre-tax income. Look at it this way: you can donate MORE for the same out of pocket expense if you claim it.
I know exactly what it means, and your argument is flawed in that the charity doesn’t get a cent more if I claim it on tax or not.
Actually Minotaur the argument is not flawed in that the money returned to you from the government can be donated to your charity. Hence more to give. Budgets can be tight but greater tax return means I may not have to cancel my child sponsorship.