Tax time. There’s no fooling us, for the self-employed, it’s usually a dreaded period triggering thoughts of big bills and money down the proverbial drain. But the end of financial year doesn’t have to be so bad. If you can maximise your claims it means you can minimise your debt.
Research from Officeworks shows that on average, Australians miss out on $426 of unclaimed tax each year, that’s more than $1.65 billion nationwide. Which essentially means the ATO is rolling in it. But why? Well, it seems people simply don’t know what they can claim. But never fear, because we’re setting the record straight…
The Basic Rules…
In order to abide the law, take note. The ATO states that to claim a tax deduction a purchase must have been made in the last financial year and be work-related rather than personal or domestic, and you may need a receipt as evidence.
You can’t include things like speeding tickets or parking fines. Nice try. Other than that, you can generally claim work-related vehicle expenses, occupation-specific clothing, tools of your trade, union fees and laundry costs.
The Gold Mine…
Most self-employed workers will be able to claim a deduction for work-related car expenses. If you have to carry bulky equipment or attend meetings, these are all reasons why you can claim your car as an expense using either the cents per kilometre or logbook method.
Your Tax Affairs
Fees paid to a registered tax agent for handling your tax matters are all deductible.
The purchase of protective products needed for your work, such as sunglasses, work boots safety vests or ear muffs, can all be claimed. Don’t forget, you can also claim the cost of washing your gear. Think company shirts, protective wear and other clothing that has company names on it. A rough estimate is that washing costs you $1/load, and perhaps you do a load a day, 365 days a year.
Your Business Refreshments
Been wining and dining a client? The rules on deductions here are a little grey… In order to be deductible, food and drink must be considered to be a refreshment and not for entertainment. Anything provided for enjoyment or in a social setting is regarded as entertainment. However, this treatment doesn’t apply to refreshments that allow you, your employees and the client to complete the working day in comfort. For example, simple meals involving sandwiches, finger foods and salads consumed during work hours on your business premises are not deemed to be entertainment.
Your Union Fees
Are you part of a union? If you pay work-related membership fees you can claim these too.
Your Tools Of The Trade
The ATO lets you claim tools that you use to make a living, and if you’re a tradie, just about every tool you own falls into this category so you’re in luck. The rule of thumb is that if a tool costs under $300, you can claim 100% as a tax deduction in that same year. If the tool/s cost more than $300, you have to claim a decline in its value over several years.
You may be able to claim a deduction for self-education expenses if your study is work-related. There are a few ifs/ands/buts here but generally, if your education is defined as courses undertaken at an educational institution, attendance at work-related seminars or conferences, or self-paced learning and study tours (overseas or within Australia), you are most likely eligible. Education suddenly just got so much more appealing…
Are you using your personal phone to take and make work calls? The good news is you generally can claim the cost of these calls as a deduction on your tax return. Remember, you can only claim the cost of your work related calls, not your entire phone bill so it’s a good idea to keep a record of when you use your personal phone, to determine the average percentage of your calls that are work-related.
Sarah pays $49 per month for her mobile phone plan. She estimates that 50% of her monthly phone calls are work related. Therefore:
50% of $49 = $24.50 per month
$24.50 x 12 = $294 per year
Sarah can claim $294 on her tax return as a deduction for mobile phone expenses
Your Home Office
If you have a home office, you’re allowed to deduct a portion of your rent or mortgage. The amount is based on the percentage of your home that is a dedicated home office (size of space and other rules apply). The deduction doesn’t end with what you pay for the space, however, you can also deduct a percentage of the utilities like internet and electricity, office furniture and supplies like your computer and printer.
Tom lives on his own and pays $60 per month for his home internet that is in his name. He estimates that 40% of his home internet use is for work purposes.
40% of $60 = $24 per month
$24 x 12 = $288 per year
Tom can claim $288 of Internet deductions on her tax return this year.
If you incur any business travel-related expenses you may be eligible to claim a deduction. This includes things such as transport, accommodation and even meals. If you’re away for one night or more, you’ll need to keep a record of everything you buy. If you’re away for six nights or more, you’ll also need to keep a diary to record all your business activities while you’re away.
As a self-employed worker there are plenty of other fees associated with business that you can also claim. Think advertising and quoting expenses, industry license and registration fees, banking and accounting fees, relevant insurance and liability fees, bridge and road tolls, and even parking fees (but not fines!).
Feeling overwhelmed? Get a free trial of our Just Done accounting platform and let us help you manage your bookkeeping, tax, BAS and more.
Want 1 Month
Enter your details below to receive your exclusive code.