With the tax return lodgement deadline of 31 October looming into view, millions of people will be looking to lodge their returns to beat the deadlines and hopefully bag themselves a tasty tax refund into the bargain.
To get the best out of your taxes, you need to claim all the deductions you’re entitled to. However, there are strict rules around what you can claim;
Firstly, you need to have incurred the expense and not been reimbursed;
Secondly, it must directly relate to the income you earned (for instance from your job, business or investment); and
Thirdly, you need to be able to prove that you spent the money, so you’ll need an invoice, receipt or some other proof of purchase (like a bank statement).
If you tick all those boxes, you should be OK. Having said that, there a few things that people often try to claim as deductions that are never – or at least very rarely – deductible, even though taxpayers often swear blind that they are entitled to make a claim.
Also read: 9 most outrageous tax return claims revealed
So, here is my list of the top things that people think are deductible – but really aren’t!
The argument is that the only way you can work is to put the children into day care, so it must be a work-related expense, right? Wrong. Child care is a private cost and not tax deductible.
Many people need a high level of fitness to do their jobs (such as police officers or military personnel) but that doesn’t mean they can claim a deduction for getting fit.
The category of people who can claim a deduction for gym memberships is restricted to those whose fitness level is well in excess of the norm. So, normal military personnel can’t make a claim but members of the special forces can make a claim, and so can professional sportspeople, but not gym teachers.
Deductions can be claimed for things like protective clothing, work-related uniforms and occupation specific clothing (like barristers robes), but conventional clothing isn’t claimable. Many people try to argue that their business suits are occupation specific because they never wear a suit outside work.
Sadly, the ATO doesn’t agree; such items are regarded as conventional clothing and are not deductible. In addition, you can’t claim a deduction for getting your business attire laundered or dry cleaned for the same reason.
You might need to look your best for work but that doesn’t mean that the money spent on haircare, make-up and even cosmetic surgery is tax deductible. Such costs are regarded as private in nature and not claimable.
Home to work travel
As a general rule, the cost of the daily commute isn’t deductible. So far as the ATO is concerned, the daily grind begins when you get to work and ends when you leave, so the time you spend getting to and from work is private in nature and expenses associated with it (such as train fares, or petrol) are not claimable.
There are exceptions if you’re required to carry bulky tools or equipment or if you are an “itinerant” worker (someone with no fixed workplace who travels to different worksites every day) but expect the ATO to look closely if you claim to fall into one of those exemption.
Lots of marketing, PR and media people would love to claim the cost of their Netflix or Foxtel subscriptions but the number who can actually do it is small, and even then only a proportion can be claimed.
You can claim if you can show that you're required to access pay TV as part of your work. The amount of the deduction is limited to the content that is specific to earning your income.
Sporting club memberships
What better way to widen your circle of work contacts than by joining the local golf club? Surely, a business meeting on the golf course is more likely to land a deal than sitting around the boardroom table?
Quite possibly, but that doesn’t make golf club memberships (or other similar costs, such as tennis clubs or MCG memberships). Such expenses are private in nature and not deductible
Similarly to the above, it might seem easier to land new business by taking customers out to that swanky new restaurant that’s just opened but that doesn’t cut any ice with the taxman. Money spent on entertaining is not tax deductible.
Some people have medical issues that impact their ability to work so the thinking goes that if they need to invest in medical treatment or some form of medical appliance to mitigate the effect of that health issue in order to allow them to work, it must be tax deductible.
As a result, we see lots of people trying to claim for things like sleep apnea machines, hearing aids, wheelchairs and artificial limbs. Unfortunately, the ATO regards the cost of such devices as private in nature since they are primarily intended to improve the health and wellbeing of the taxpayer. So, the costs are not deductible.
Of course, there used to be a tax offset for medical expenses, which provided an alternative way for many people to obtain tax relief for this kind of expense. Sadly, it was abolished on 1 July 2019.
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