The Golden Rules of tax deductions

Mark Chapman, director of Tax Communications, H&R Block reveals how to be tax savvy.

If you want to make a claim for work-related expenses, you need to follow the three golden rules:

The expense must relate to your work

You mustn’t have been reimbursed by your employer

You must be able to prove that you spent the money. That means that you must keep receipts, invoices or statements to demonstrate that you actually incurred the expense.

H&R Block’s tip is to keep electronic copies of all documentation relating to expenses. Paper receipts get lost or fade, so keeping everything together on your phone or computer will save time and effort when you come to complete next year’s tax return.

Get Help

There’s a reason why nearly 75 percent of people use a tax agent to help them do their taxes. Tax is complicated and stressful and if you do it yourself, you’re likely to make a mistake. You might claim something you weren’t entitled to and find yourself audited by the ATO or you might miss out on a deduction you could have claimed but didn’t realise was available to you; the result is a lower refund than you could have got. Using a tax agent takes away the stress and opens up a whole world of expertise to guide you through the process, so you can be sure you’re claiming everything you’re entitled to. You wouldn’t generally choose treat a medical condition yourself, you’d see a doctor so why should tax be different? Get expert advice and the fee will generally be more than covered by the bigger refund and the peace of mind.

If you use your car as part of your work, for instance to travel to clients, between jobs, to expos or to collect supplies, you can claim the costs of your work-related journeys. If you use your own car, either claim 68 cents per kilometre up to a maximum 5,00 kms or keep a logbook and claim your actual expenses. You can also claim for parking, tolls and public transport if you don’t use your car.

You can’t claim the costs of traveling to and from work (the daily commute) though you might be able to make a claim if you’re required to transport equipment which you can’t safely store at work (TIP: the ATO checks such claims closely so make sure you can prove your claim).

Equipment

You can claim the cost of buying tools and equipment that you use in the beauty business. If the item costs $300 or less, you can claim it straight away and if the cost is more than $300, the cost is depreciated over several years. If you’re in business on your own account, rather than being employed by someone else, you can immediately write off all items of equipment costing less than $20,000. This could include makeup brushes and applicators, waxing kits, mobile phones, laptops and bags or briefcases.

You can also claim the cost of insuring work-related equipment.

Self Education

You can claim the cost of any work-related courses that you undertake, provided that they relate directly to your current role and aren’t intended to boost your skills into a promotion or another role entirely. That could include courses on makeup techniques, massage and nails. It could also include management training if you supervise staff. Courses run by a university or TAFE such as Cert IV in Beauty Therapy or Diploma in Salon Management could also be relevant. In addition to the cost of the course, you can claim travel costs to and from the course, accommodation and meals if you’re required to sleep away from home, books, stationery and depreciation on computer equipment used in your study.

Clothing

If you’re required to wear a uniform at your workplace, the cost of purchasing the uniform is claimable and you can also claim for the cost of cleaning the uniform. Conventional clothing doesn’t count as a uniform so ideally any garment you claim for should have the business logo on it.

You can also claim for protective items such as gloves, aprons, hats or hair nets, goggles and non-slip shoes.

Don’t forget to claim these costs…

If you work from home (at weekends or in the evenings for instance) you can claim a deduction for home office expenses. Either claim 45 cents per hour or claim a proportion of your actual costs, based on a diary of work use.

Claim for professional subscriptions, whether to a professional body or to a trade union.

The cost of work-related magazines and journals.

The cost of work-related books (for instance, books focussing on styling, colour, beauty, or management).

If you’re required to work overtime, you can claim for the cost of buying meals provided you have been paid an allowance by your employer.

Agency costs: if you get your work through an agency, the cost is claimable.

The cost of using a tax agent is itself tax deductible, including costs incurred in travelling to see the tax agent.

If you use your mobile phone for work purposes, you can claim a proportion of both the cost of the phone and the monthly bill, to the extent that the costs relate to work or business.

If you attend exhibitions, competitions or other events in a professional capacity, the costs are claimable.

Claim for conference expenses. As well as the cost of the conference itself, that can also include travel, meals and accommodation costs – even where the conference is overseas, though you might need to apportion the costs (and disallow the private bit) if you spent some downtime on the beach afterwards!

You can claim a deduction for charitable donations provided the amount is $2 or more and you have a receipt.

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