Tax Deduction Substantiation – What Can I Claim?

In recent years the ATO has taken a closer look at work related deductions. If you’re simply repeating the same claim year on year, the ATO are more likely to start asking questions. Therefore, it’s more important than ever that you’re aware of your responsibilities to substantiate any claims you make in your tax returns.

Remember – you must keep your written evidence for 5 years from the date you lodge your tax return!

WHEN YOU CAN CLAIM A DEDUCTION

1. You personally incurred the expense without receiving reimbursement,
2. The expense must be directly connected to earning income, and
3. You are required to keep a document (typically a receipt) as evidence of the expense.

PHONE & INTERNET

For mobile phone, internet & home phone expenses – there are 2 methods you can use to work out your claim:

1. Incidental use: for claims under $50
2. Itemised bill: for claims over $50

Incidental use – where your claim will be under $50. For 2023/24 the deduction can be calculated based on the number of calls for the following:

• $0.25 per work calls made from your landline
• $0.75 per work calls made from your mobile
• $0.10 per work related text messages sent from your mobile
• Total work-related internet data used divided by the total internet data used.

Itemised bill – if you intend to claim a deduction for more than $50, you can determine a percentage of your work-related calls over a 4-week period each year. You will need to be able to demonstrate this via diary entries and or identifying work versus private call/internet usage on your invoices/bills for this representative period.

WORKING FROM HOME

Working from home has grown in popularity since Covid. There are two methods you can use to claim working from home (WFH). The key message from us is to keep good records!

1. Fixed rate method: $0.67 per hour for 2023/24
2. Actual costs: a percentage of running expenses

Fixed rate method which is a set all-encompassing hourly rate which covers all running expenses such as electricity, gas, phone, internet, stationery & consumables. With this method you can’t claim additional phone or internet costs as it is already included in the hourly rate. You can still however claim depreciation on any dedicated home office equipment or furniture.

You need to keep a record of all the hours worked from home for the entire income year. This has been the case since 1 March 2023. Estimates or the previous 4-week representative period will now not be accepted.

Actual cost method allows you to claim a percentage of actual work-related running expenses. This method also requires you to maintain detailed records of expenses. The ATO will accept a written record such as a diary which reflects a 4-week usual pattern of working from home or the number of actual hours you work from home during the entire year such as via a timesheet or spreadsheet.

The ATO has a calculator that can assist with the above here.

TRAVEL

For travel expenses, it’s important to keep receipts for any fares, accommodation, food, drink and incidentals incurred.

If you a traveling for 6 nights or more you will need to keep a travel diary which records the dates, places, times and duration of your activities and travel. You need this to calculate what proportion of your travel is work related and what is private. You can only claim the work-related part of your travel as a deduction, not the private travel!

MOTOR VECHICLES

There are two methods available to work out your claim:

1. Logbook: claim a percentage of actual costs
2. Cents per km: claim statutory amount per work-related KM travelled (cars only)

Logbook Method

As the name suggests, the logbook method requires you to maintain a logbook over a continuous period of 12 weeks to determine the percentage of work-related travel. This is then valid for 5 years. A valid logbook must record opening and closing odometer details and specifics of every work-related trip made during the period. Remember home to work travel is not considered work-related. WLF has complimentary logbooks, if you would like one, please get in touch.

You can then use your logbook percentage to claim fuel & oil, repairs, services, interest on a car loan, lease payments, insurance and registration associated with the use of your vehicle you must keep the receipts.

Electric cars – home charging

Additionally, when using the logbook method there’s a specific rate for calculating the cost of electricity when an electric vehicle is charged at home, known as the EV home charging rate.

• This rate is: 4.2 cents per KM.

You must record opening and closing odometer records for the year. Alternatively, if you use a commercial charging station, you can use the receipts to make your claim. Importantly, you can’t use both methods!  

Cents per KM method

If you don’t have a logbook, you can still claim up to 5,000 kilometres using the cents per KM method for your car.

• The rate for 2023/24 is 85 cents per work-related KM
• The rate for 2024/25 is 88 cents per work-related KM

The maximum deduction under this method is now $4,400 (5,000kms x 88c).  

This method is only available if your vehicle is a “car” for tax purposes. Essentially, a “car” is designed to carry fewer than 9 passengers and has a payload of less than one tonne.

It remains essential to substantiate your claim, requiring a logical analysis of your business use. Should the ATO inquire, you’ll have to demonstrate the method used to calculate your kilometres travelled. The ATO will also review claims from others in your field, and if your claim is notably high, it may prompt an investigation.

EDUCATION

To claim a deduction for self-education expenses, you must be able to demonstrate that your self-education costs relate to your current employment activities.

Self-education costs can include course fees, textbooks, and stationery and you will need to retain the receipts to support your claim.

You can also claim travel and home office expenses in the same way you would claim work-related expenses.

Unfortunately, you can’t claim a deduction for repayments made to your Higher Education Loan Programs (HELP), Student Financial Supplement Scheme (SFSS), Student Start-up Loans (SSL) or Trade Support Loan Program (TSL)

LAUNDRY

You can claim a deduction on the cost of buying and cleaning occupation-specific clothing, protective clothing and uniforms. You can’t claim on clothing that is not branded, such as a suit.

You will need to retain the receipts or have a diary of written evidence detailing your cleaning costs to claim a deduction if your claim is greater than $150 and your total work-related expense claim exceeds $300.

If you don’t provide written evidence for your laundry expenses, you must use a reasonable basis to work out your claim by either;

• $1 per load (including washing, drying & ironing) if the load is solely work-related clothing, or
• $0.50 per load if other laundry is included.

As always, if you have any questions about your tax deductions and how you can responsibly minimise your tax please contact your WLF Advisor.