There are different types of deductions that individuals can claim to reduce their taxable income. 

Work-related expenses

In order to claim work-related tax deductions, the expenses must have to meet three criteria. Firstly, all the expenses have to be paid by the individual, without being reimbursed by the employer. Secondly, they must be directly related to earning your income. Finally, there must be a record of the expenses (i.e. a receipt). 

There are various different expenses that can fall under this category. 

• Vehicle and travel expenses: Commuting between different locations but not usual travel between home and work
• Clothing, laundry, and dry-cleaning expenses: Cost of work uniform which is distinct and unique (i.e. has a specific logo)
• Self-education expenses: Any courses or study associated with employees current role, such as textbooks
• Tools and other equipment: If you purchase tools or equipment, then a deduction for some or all the cost could be claimed

Investment expenses

The cost of earning interest, dividends, or other investment income can also be claimed. This can include:

• Interest charged on money borrowed to invest
• Investment property ex[enses
• Investing magazines and subscriptions
• The money you paid for investment advice

Home office expenses

A portion of the costs associated with installing your home office can be deducted. The process is now much easier due to COVID-19. It allows people to claim 80 cents per hour for all running expenses. Additionally, people living in the same house can claim this individually, there is no need for a dedicated office. 

Other deductions

There are also other deductions available. These include:

• Union fees
• The cost of managing your tax affairs
• Income protection insurance (If not through super)
• Personal super contributions
• Gifts and donations to organisations that are endorsed by the ATO as deductible gift recipients

When making a claim in relation to your residential rental property, there are specific circumstances for when you can and cannot claim travel expenses. The law about claiming travel expenses for rental properties changed in July 2017. In the last year alone, the ATO received more than 70,000 incorrect claims for travel to and from residential rental properties.

A residential property is defined as land or a building that is either occupied as a residence or intended for and capable of being occupied as a residence.

Owning one or several rental properties is not usually considered to be in the business of letting rental properties, with receiving income from letting property to a tenant being considered a form of investment rather than a business. Unless you have an ownership interest in the rental property, you cannot claim travel expenses, even when travelling for the purposes of maintenance or inspections. You can only claim travel expenses if you are in the business of letting rental properties or are an excluded entity.

Entities that can claim travel expenses are:

• Corporate tax entity.
• Superannuation plan that is not a self-managed superannuation fund.
• Public unit trust.
• Managed investment trust.
• Unit trust or a partnership.

For those who are eligible to claim travel expenses, claims can be made on the following:

• Preparing the property for new tenants (except the first tenants).
• Inspecting the property during or at the end of the tenancy.
• Undertaking repairs, where those repairs are because of damage or wear and tear incurred while renting out the property.
• Maintaining the property, such as cleaning and gardening, while it is rented or available for rent.
• Collecting the rent.
• Visiting an agent to discuss the rental property.

Could your small business claim a 20% bonus deduction on technology expenditure that supports their digital operations or the digitisation of their operations?

The small business technology investment boost is a broad measure intended to cover a wide range of business expenses and assets; however, questions may arise when you go to claim.

Can I Claim The Boost? 

To access the small business technology investment boost, your business needs to meet the standard aggregated annual turnover rules (with an increased $50 million threshold).

The expenditure must:

• already be deductible for your business under taxation law
• be incurred between 7:30 pm AEDT 29 March 2022 and 30 June 2023.

If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use for a taxable purpose by 30 June 2023.

What Can I Claim With The Boost? 

A good indicator of eligibility is to consider if the small business would have incurred the expense if they didn’t operate digitally. That is if they hadn’t sought to adopt digital technologies in the running of their business. Using this rule of thumb, the costs below are eligible:

• advice about digitising a business
• leasing digital equipment
• repairs and improvements to eligible assets that aren’t capital works.

Eligible expenditure may include, but is not limited to, business expenditure on:

• digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks
• digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design
• e-commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth
• cyber security – cyber security systems, backup management and monitoring services.

Whether some expenditure is eligible for the boost will depend on its purpose and link to digitising the operations of the specific small business. For example, the cost of a multifunction printer would not be eligible if it were intended only to make copies of paper documents. However, it would be claimable if it was being used to convert paper documents for digital use and storage

New and ongoing subscription costs can also qualify as eligible expenditures if related to your client’s digital operations. For example, your ongoing subscription to an accounting software platform for your business would qualify. Likewise, a new subscription for digital content that is used in developing web content to advertise their business would be eligible.

In these cases, you should keep explanations of how the expenses relate to digitising their business, as well as accurate records of all their claims.

Where the expense is partly for private purposes, the bonus deduction can only be applied to the business-related portion.

Special rules apply if claiming the bonus deduction for eligible expenditure on a depreciating asset.

To avoid confusion or complications around applying the small business technology investment boost, it may be best to speak to your trusted tax agent. We’re here to help.

Individuals upskilling and educating themselves during these down times may be eligible to claim a deduction for their self-education expenses. The deductions apply to self-education activities that are directly related to an individual’s work as an employee.

In the case that individuals are looking to claim self-education expenses based on a course’s relation to their work, the relation must mean:

• maintaining or improving the specific skills or knowledge the individual requires in their current work activities;
• resulting in, or likely to result in, an increase in the individual’s income from their current work activities.

There are many types of expenses you can claim as part of your self-education deduction, including:

• General course expenses (e.g. tuition fees, stationary, textbook, student union fees)
• Depreciating assets (e.g. computer, desk)
• Repair costs to assets used for self-education purposes
• Car assets (claimed using the cents per kilometre method)

Work-related self-education expenses cannot be claimed as part of a deduction. These expenses include travel expenses, child care costs related to attendance of courses and capital costs of items (e.g. computers, desk) acquired for self-education purposes.

Keep in mind that self-education courses which enable individuals to get new employment are not eligible for deduction claims. Some expenses also need to be apportioned between private purposes and use for self-education such as travel costs and depreciating assets. You will need to estimate your apportions and provide information on such expenses to be eligible to claim.

For more information on what you claim as self-education expenses, visit the ATO website or consult with a financial advisor.

As a business owner, one of the perks is the ability to claim tax deductions for expenses related to motor vehicles used in your business operations. This includes cars and certain other vehicles that play a role in running your business smoothly. The good news is that claiming motor vehicle expenses can help reduce your tax liability. Let’s explore how you can maximise this opportunity, particularly if you’re a sole trader or part of a partnership.

The Logbook Method: A Simple Way to Claim Tax Deductions

Sole traders and those operating in partnerships can claim tax deductions for vehicles used in their businesses using the logbook method. It’s a relatively straightforward approach, but it does require diligent record-keeping of your vehicle-related expenses. The expenses you can claim when using your vehicle for business purposes typically include:

• Fuel and oil
• Repairs and servicing
• Interest on a motor vehicle loan
• Lease payments
• Insurance cover premiums
• Registration
• Depreciation (decline in value)
• Calculating Your Claim with the Logbook Method

To make the most of the logbook method and ensure you’re accurately recording your expenses, consider enlisting the help of a registered tax agent. To work out the amount you can claim using this method, follow these steps:

• Keep a logbook.
• Calculate your business-use percentage by dividing the distance traveled for business purposes by the total distance traveled and then multiplying by 100.
• Sum up your total car expenses for the income year.
• Multiply your total car expenses by your business-use percentage.

It’s vital to provide the Australian Tax Office (ATO) with evidence of the expenses you’re claiming. This means keeping records of:

• An electronic or pre-printed logbook.
• Evidence of actual fuel and oil costs or odometer readings used to estimate fuel and oil expenses.
• Evidence of all other car-related costs.

The Crucial Logbook

The logbook is a critical component of this claims method, and it should contain specific information, such as:

• The start and end dates of the logbook period.
• Odometer readings at the beginning and end of the logbook period.
• The total number of kilometres travelled during the logbook period.
• The number of kilometres for each journey, which can be recorded as a single journey if you make two or more trips in a row on the same day.
• Odometer readings at the start and end of each subsequent income year for which your logbook is valid.
• The business-use percentage for the logbook period.
• Make, model, engine capacity, and registration number of the car.

If this year marks the first time you’re using a logbook, remember that it should cover at least 12 continuous weeks during the income year and be representative of your travel patterns throughout the year.

If you plan to use the logbook method for multiple vehicles, make sure that the logbook for each vehicle covers the same timeframe. The 12-week period you choose should indicate the business use for all vehicles. This ensures you maintain consistency and don’t alter your driving patterns to fit the logbooks.

Keep in mind that distinguishing between business and personal use is crucial for accurate claims. Generally, travel between your home and your place of business is considered private use unless you operate a home-based business and the trip was for business purposes.

Claiming motor vehicle expenses for your business can be a valuable tax-saving strategy, but it requires careful documentation and adherence to ATO guidelines. With the logbook method, you can maximize your deductions while maintaining the integrity of your business and personal expenses. So, get started on keeping that logbook and consult a tax professional for expert guidance on your journey to tax savings.