What Expenses Can You Claim vs. Cannot Claim?

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Meeting your tax obligations each year is important. One area of taxation that often confuses support providers is what does—and does not—count as an eligible tax deduction?

But first—what’s a tax deduction?

Tax deductions are claims for expenses directly tied to the business that business owners can list on their return.Tax deductions reduce your amount of taxable income, boosting your refund at the end of the year.A tax deduction can include any work-related expense, such as the cost of uniforms, tools used in your practice, and any work-related travel.

Are there rules for claiming tax deductions?

Let’s start with the basics. To claim any deduction on your return, you must adhere to the Australian Taxation Office’s (ATO) three rules:

  1. The claim must be for an expense directly tied to your business, not for a private expense.
  2. For expense claims that are both business and private, you may only claim the business portion.
  3. You must have a record of the expense.

Support providers often miss out on deductions—or claim items that don’t meet the above parameters—simply because they don’t understand which deductions are allowed.

12 Common Deductions for Support Providers

NexZen Accounting has created this list of the 12 most common deductions for support providers (based on this list from the ATO) to help you with your tax preparation this year:

  • Vehicle expense
  • Home-based business expense
  • Travel expense for business
  • Worker salary, wage, and super contribution expense
  • Repair, maintenance, and replacement expense
  • Working expense
  • Asset depreciation and capital expense
  • Consumables expenses
  • Work-from-home expenses
  • Mobile and internet expenses
  • Computer, laptop, and office equipment expenses
  • Tax accounting professional services

Let’s take a closer look at these allowable expenses.

Vehicle expenses

If you must drive your car for work, you can claim a deduction.You cannot claim the vehicle expense deduction for your necessary trips from home to work and back.

  • Home-based business expense
  • If you carry out some or all business activities from home, you might be allowed to claim:
  • Occupancy expense, such as mortgage, rent, land tax, and council rates
  • Running expense, such as phone, electricity, furniture, furniture repairs, and cleaning
  • Motor vehicle trips from your home to other places as long as the trip is business-related
  • Work-related travel

In addition to your vehicle expenses, you may also have work-related travel expenses. These can include toll charges, airfare, bus passes, or meals when you’re traveling for work and staying overnight.You can claim travel from the home of one client to another, and sometimes you can also claim travel for work-related activities with a client, such as appointments.You may also be able to claim meals that you have with clients when traveling.

Worker salary, wage, and super contribution expense

Because you own a business, you can typically claim deductions for:

  • Employee salary and wage compensation
  • Super contributions into a compliant super fund or RSA for employees and some contractors.

These are also typical operating expenses.If you run your business as a sole trader, you can also claim your own contributions on your personal return.

Repair, maintenance, and replacement expense

Deductions for repair, maintenance, or replacement expenses are allowed as long as: The amount was used to replace machinery, tools, or a physical premises used to produce your business income. Claims cannot be for amounts considered capital expenses.

Working expense

These are expenses that occur in the everyday operation of your business. Such expenses could include:

  • Company stationery
  • Building rent
  • Stock purchases

These are also sometimes referred to as operating expenses.Most operating expenses must be claimed in the income year in which you incurred them, and only the business-related portion can be claimed. For operating expenses that are both business and private, such as mobile calls, you can only deduct the business portion.

Asset depreciation and capital expenses

Capital expense deductions are generally claimed over time. You might be allowed to use an instant write-off, which lets you claim a deduction for the entire purchase cost in the financial year you bought the asset and used it. Capital expenses are either:

  • Depreciating assets, including the purchase amount and the amount you incurred from its transport or installation
  • The cost of improving your business

You must keep complete and accurate records of all expense deductions you wish to claim. Other allowable expenses include:

Consumable supplies

As a support provider, you probably pay for supplies that help you in your day-to-day job. Such supplies, or consumables, can include stationery, hand sanitiser, sunscreen, or printing paper.

Work-from-home expenses

It’s typical for support providers to perform some of their tasks from home. This can include such tasks as submitting timesheets, client activity research, phone calls, and emails.You can claim deductions for the time you spend working at home for such expenses as electric, air conditioning, or heating.If you also have a dedicated office space within your home, such as a spare room you use as an office only, you can enjoy an increased deduction. Beginning with the 2019-2020 financial year, you can claim a home office deduction even if you don’t have a dedicated office space. To claim the deduction, estimate how many hours you worked from your home office and multiply by the relevant rate for the year.

Mobile and internet expenses

Support providers typically use a mobile phone during the workday for work-related purposes. You probably also have a computer at home that’s connected to the internet. You probably use these devices to connect with clients or to organize your calendar. Any work-related usage of these devices is eligible for a deduction. If you also use these devices for non-work-related activities, you can only deduct the business-related portion.

Computer, laptop, and office equipment

Besides deducting your mobile and internet expenses, you might also be allowed to claim the purchase price of the phone or computer. If you work as a sole trader, you can deduct the entire purchase price of any mobiles or computers purchased during a financial year.

Tax accounting professional services

Some support providers use professional tax accountants like nexZen to prepare and send in their tax returns to the ATO. You can claim any amounts you pay to your tax accounting service in the tax year in which you paid it.

What expenses can you not claim as a deduction?

Some expenses generated during the course of business are not considered business-related. Some of the expenses that you cannot claim include:

  • Entertainment
  • Traffic fines
  • Private expenses, such as childcare or family clothing
  • Earned income expenses that aren’t assessable, such as hobby income
  • GST on purchases that can be claimed as GST credits on your activity statement

Also, if you earn personal services income, there may be limits on deductions. nexZen Accounting Firm helps support providers around Australia with all their accounting needs—and we can help you, too. Reach out to the team today.

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This is a loser that most people are probably pretty happy about — the government is extending a task force that targets tax avoidance by multinationals, large public and private groups, trusts and wealthy individuals.

It is giving the Australian Tax Office (ATO) more than $600 million over the next three years to keep the scrutiny on those groups.

The budget forecasts the extension of the task force will make the government $2.1 billion in revenue from tax over the next four years.

From

2022-23 income year

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied. 

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

  • Up to $10 million annual aggregated turnover for GST instalments and 
  • $50 million annual aggregated turnover for PAYG instalments 

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From12.01am 30 March 2022

There are a few jokes going around social media about the price of fuel.

As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away. 

 The reduction extends to all other fuel and petroleum based products except aviation fuels.

At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period. 

The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

The measure comes at a cost of $5.6bn.

From

1 July 2021 to 30 June 2022

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

 

Taxable income 

Offset 

$37,000 or less 

$675

Between $37,001 and $48,000 

$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500

Between $48,001 and $90,000 

$1,500

Between $90,001 and $126,000 

$1,500 minus 3 cents for every dollar of the amount above $90,000 

From

April 2022

A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and concession card holders:

  • Age Pension 
  • Disability Support Pension 
  • Parenting Payment 
  • Carer Payment 
  • Carer Allowance (if not in receipt of a primary income support payment) 
  • Jobseeker Payment 
  • Youth Allowance 
  • Austudy and Abstudy Living Allowance 
  • Double Orphan Pension 
  • Special Benefit 
  • Farm Household Allowance 
  • Pensioner Concession Card (PCC) holders 
  • Commonwealth Seniors Health Card holders 
  • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

    The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.

Just prior to the Budget, the Government announced:

  • First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers to purchase a new or existing home. 
  • Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
  • Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).

From

1 July 2021

The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

 

2020-21 

2021-22 

Singles 

$23,226 

$23,365

Family threshold 

$39,167 

$39,402

Single seniors and pensioners 

$36,705 

$36,925

Family threshold for seniors and pensioners 

$51,094 

$51,401

 
For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597. 

From

1 July 2024


Trust and beneficiary income reporting and processing will be digitalised with all trusts being provided with the option of lodging income tax returns electronically.

While this measure will reduce compliance costs, it will also increase transparency and provide the ATO with a greater insight into where anomalies are occurring.

The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023. 


Minimum superannuation drawdown rates 2019-2023

Age 

Default minimum drawdown rates (%) 

Reduced rates by 50% for the 2019-20 to 2022-23 income years (%) 

Under 65 

65-74 

2.5 

75-79 

80-84 

3.5 

85-89 

4.5 

90-94 

11 

5.5 

95 or more 

14 

 

From 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.An annual expenditure cap of $100,000 will apply to the boost. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.  

From

1 January 2024

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments. 
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance. 

In bad news for people’s pay packets, real wages are not forecast to grow until later this year at the earliest thanks to higher-than-expected inflation.

At the end of last year, Treasury predicted the inflation rate would be 2.75 per cent. The reality has ended up being around 4.25 per cent.

The budget is predicting wages will only be just higher than inflation in the next couple of years, meaning cost of living pressures are unlikely to ease any time soon.

Despite current price hikes, the budget is forecasting inflation will taper off and wages will grow faster by the middle of the decade.

From

1 January 2024

As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.

The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022. 
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet:

  • New South Wales Accommodation Support Grant 
  • New South Wales Commercial Landlord Hardship Grant 
  • New South Wales Performing Arts Relaunch Package 
  • New South Wales Festival Relaunch Package 
  • New South Wales 2022 Small Business Support Program 
  • Queensland 2021 COVID 19 Business Support Grant 
  • South Australia COVID 19 Tourism and Hospitality Support Grant 
  • South Australia COVID 19 Business Hardship Grant.

    This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment. 

As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis. 

The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.

From

1 July 2022

Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.


This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

From

1 July 2021

As previously announced, workrelated COVID19 test expenses incurred by individuals will be made tax deductible. 
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID19 testing to their employees for workrelated purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

From

7:30pm AEDT, 29 March 2022 until 30 June 2024

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released. 
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

Just prior to the Federal Budget, the Government announced the extension of the:

  • Boosting Apprenticeship Commencements wage subsidy, and
  • Completing Apprenticeship Commencement wage subsidy.

    Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
  • 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
  • 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
  • 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025.
In that time, the taskforce is expected to increase receipts by $2.1bn and increase payments by $652.6m.

Buried under the wildly exciting headline of Commonwealth’s Deregulation Agenda, is the $19.9 million spend by the Australian Bureau of Statistics to develop a new reporting application to enable businesses to submit surveys on business indicators directly through their accounting software. Excellent. Real time reporting utilising verified data on the state of Australian business. Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market.

Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects.

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