Current as of July 2015
When completing your 2015 tax return this year, it is important to be mindful of the expenses you claim as tax deductions, to avoid putting yourself onto the ATO’s radar and increase the risk of an audit.
Expenses incurred to earn assessable income are tax deductible, but there are expenses that are not deductible under the tax law. Examples of these are discussed below.
- Vaccination – the cost of vaccination is generally not deductible as the expense is considered to be personal medical expense (they are private in nature). Airline employees usually think that they can claim this type of cost as a tax deduction but this is incorrect. Only medical expenses tax rebate can be claimed.
- Entertainment expenses – the costs of you personally having a fine lunch or enjoying a nice bottle of wine with your client or co-worker is generally not deductible. Where an employer pays for this cost it may become tax deductible, but fringe benefits tax would be applicable.
- Childcare and education costs – these costs are not deductible as they are not directly related to earning an income. There may be tax rebates available from the government.
- Speeding and parking fines – the tax law specifically disallows you from claiming any fines that are imposed as a result of breaching any Australian or foreign law.
- Commuting from home to work – costs incurred commuting between home and work are generally not deductible, unless the employee is required to carry heavy or bulky equipment to work each day.
- Grooming costs – costs such as cosmetics, skin care products and hairdressing are generally not deductible (they are private in nature).
- Driver’s licence cost – the cost of holding a driver licence is not deductible, even if it is a requirement of your employment.
- Volunteer work costs – costs incurred in performing your volunteer work are not deductible. This is because you are not gaining any assessable income. The costs cannot be claimed against other income earned (i.e. salary)
- Police checks – the cost for an employee to obtain a police check for a prospective employer is not tax deductible, as it is incurred prior to earning any assessable income.
- Expensive cars – there are a few methods in claiming a car’s running costs, but the claim on the cost of the car is capped at a set depreciation limit. The limit for the 2015 income year is $57,466, so even if you were to buy a $300,000 Porsche you still can only claim $57,466 of depreciation expenses over the car’s effective life.
In summary, to ensure you don’t run into trouble with the ATO and have your deductions denied, take into account these factors when considering whether to claim an expense or not.
- The expense was incurred in earning assessable income;
- The expense is not private in nature or a capital expense;
- The tax law does not specifically disallow the claim (i.e. fines);
- You have written evidence or records to support your claim.
If you have questions or unsure whether you can claim an expense, please feel free to give us a call.
This newsletter has been produced by Stanley & Williamson as a service to its clients and associates. The information contained in the newsletter is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this newsletter, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under Professional Standards legislation.