While it may be far too early for some people to even think about next year’s tax return, it might be in your best interest to do so, an ATO top dog says.
Australian Taxation Office assistant commissioner Rob Thomson has encouraged taxpayers to get organised early and start thinking about what work-related expenses they might be claiming in the new financial year.
Thomson said it was a good idea to decide how you are going to store the appropriate documents and records so they are all ready to go at tax time and you will not have to scramble around.
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“Work-related expenses are the largest category of deductions the ATO sees for individuals each year, with more than eight million claims last year,” he said.
“You can set yourself up for success by checking what work-related expenses you can claim, what records you will need to prove them, and making a plan to store those records for when you’ll need them.”
What work-related expenses are deductible?
A work-related expense is deductible if it is directly related to your income, if you have spent the money yourself and if you have a record to prove it.
Many people believe they can claim $300 automatically without any proof however this is not entirely true.
“If your total claim for work-related expenses is less than $300, you may not need receipts but you must be able to show you spent the money and how you have calculated the amount of your claim,’ Thomson said.
Many people can claim working from home expenses for things such as stationery, energy and office equipment.
There are two methods you can use to work out your deduction: the fixed rate method or the actual cost method.
Using the fixed rate method means you will need a record of the number of hours you worked from home during the financial year, and at least one record for each of the extra running expenses (electricity, internet etc) you incurred.
You can claim 67 cents for each hour you work from home during the relevant income year. This includes the additional running expenses.
“To show your actual hours worked, this can be as simple as a timesheet, spreadsheet, diary or a record where you log which days you work from home and how many hours you work,’ Thomson said.
The majority of people who claimed working from home expenses in 2023 used this method.
The actual cost method means you will need to work out the actual expenses you incur as a result of working from home.
This includes internet, mobile usage and electricity and gas.
A dedicated home office is required to use this method.
Another popular deduction you can claim is car expenses.
More than three million people claimed a deduction for car expenses in 2023.
To be eligible to claim a deduction you must own or lease the car and have spent your own money.
The car-related expenses also have to be for work-related trips.
Again, there are two methods: the logbook method or the cents per kilometre method.
You can claim a set rate per kilometre using the cents per kilometre method.
It covers all of your car expenses including registration, insurance, repairs and fuel.
“Using the cents per kilometre method, you are limited to claiming a maximum of 5000km for each car you use for income producing purposes,” said Thomson said.
The logbook method means you will need to keep track of each work-related trip for a period of at least 12 weeks.
Several pieces of information must be recorded including the destination and purpose of every trip, the odometer reading at the start and end of the journey and the total kilometres travelled.
You also must include odometer readings for the start and end of the logbook period.
For other possible deductions, the ATO has occupational guides to help determine what you can claim.
What kind of proof you need and how to store them
If you don’t keep the right records, you may be considered ineligible to claim any money spent on work-related expenses.
Taxpayers can consult the ATO’s record keeping guide for help deciding what kind of documents they need to prove an expense.
You can use the myDeductions tool on the ATO app to easily store copies of all your receipts and records.
“While you might have a special place to store your vinyl collection, you don’t want to find yourself searching far and wide for receipts at tax time if you’ve forgotten to store all your records in one spot,” Thomson said.
He also noted it was important to remember to keep any records for five years from when you lodge your tax return.