Last financial year, more than 8.8 million taxpayers claimed $21.98 billion in deductions for work-related expenses. It’s an area under intense review by the ATO.

AH Jackson & Co partner Emmanuel Georga said tax deductions must take into consideration the direct connection to your income, the private portion of the expense and must legitimately maximise the full potential of the deductibility of the costs like home office and business travel.

“If you claim work-related deductions, it’s important to ensure that you are able to substantiate any claim you make,” Emmanuel said.

“In most cases you need a record, such as a receipt, proving you incurred the expense, and the expense has to be directly related to how you earn your income – that is, the expense is directly (not sort of) related to your work.

“This also means ensuring that you only claim the work-related portion of items you use personally, such as mobile phones or internet services.”

When you don’t have to keep records

Emmanuel explained that there are certain situations where you don’t have to keep records.

“If your claim for work-related deductions is below $300 you do not have to keep a record of the expense,” he said.

“Work-related clothing has a $150 record keeping limit. However, the ATO is concerned that taxpayers are ‘automatically’ claiming these deductions without incurring any expenses because of a belief that you don’t have to support the claim.”

Emmanuel said if you have claimed an amount up to the record keeping threshold, you may find that the ATO will ask you to explain how you came to that amount.

“If you don’t have diary entries or a good explanation, your claim might be denied.”

Working from home

Depending on your circumstances, you may be able to claim expenses related to working from home, but there are a variety of rules you must follow if you plan on doing so.

AH Jackson & Co partner Ben Odgers said the rules changed depending on whether you have a dedicated work space or if your home is also your principal place of business.

“If you don’t have a dedicated work area but you do some work on the couch or at the dining room table, you can claim some of your expenses like the work-related portion of your phone and internet expenses and the decline in value of your computer,” Ben said.

“If you have a dedicated work area, there are a few more expenses you can claim including some of the running costs of your home, such as a portion of your electricity expenses, and the decline in value of office equipment.

“If your home is your principal place of business, you might be able to claim a range of expenses related to the portion of your home set aside for your business. What the ATO is looking for is an identifiable area of the home used for business,” he said.

Ben said it is important to ensure any claims are in proportion to the work-related use.

“For example, you can’t claim all of your internet expenses because you do a bit of work from home in the evenings and need the internet.”

Work-related clothing

Many people believe that it is possible to claim the cost of work clothes in your tax return.

AH Jackson & Co partner Emmanuel Georga said that while it was possible to claim some work-related clothing, in general, you cannot claim the cost of your work clothes or dry cleaning expenses unless the clothes are occupation specific.

“For example, you may be able to claim occupation specific clothes such as chef’s whites or a uniform with a logo, or protective gear because your workplace has hazards (jeans don’t count as protective wear),” he said.

“Remember though, just because you have to wear a suit to work does not make it deductible.”

If you would like to discuss any of the above measures please feel free to email your AHJ contact or enquiries@ahjackson.com or call (07) 3253 1500.