We are following Jennifer who is new to the workforce and to lodging a tax return each year. She has an apprenticeship as a Carpenter.
What can be claimed?
Jennifer can claim deductions for the cost of most things connected to her income.
This might include:
- Tools
- Protective clothing like steel-capped boots and hi-visibility clothing
- Mobile phone including the device cost and accessories like cases and chargers
- Car expenses when travelling between work sites
- Course materials and fees
What can't be claimed?
Jennifer would not be able to claim the cost of her lunch each day or the cost of underwear and socks.
She also will not be able to claim the cost of travel from home to work, although there are exceptions to this.
Keeping records
Jennifer must keep receipts and other evidence of items reported in her tax return for 2 years from the date her tax return has been assessed by the Australian Taxation Office.
Receipts should be dated and be in English and Australian dollars. If they are in another language or currency you can add translated and converted information and amounts.
The tax year in Australia goes from 1 July to 30 June. Your record keeping needs to align with these dates.
Going paperless
Paper receipts fade over time. We encourage and support paperless wherever possible. It can be difficult to manage and stay on top of. Here are some options that we recommend.
The ATO app is available on Apple and Android devices. This can be linked to your MyGov account. There are also back up options available within the app itself. We also love the log-book feature included.
Simply take photos of your receipts and save them to a dedicated cloud drive folder created for that purpose. You can create a new folder for each financial year. Jennifer thinks this method will work best for her. When Jennifer is ready to do her tax return, she will send in the folder either as a shared link or zipped folder.
Other considerations
It is important to acknowledge that some things, for example mobile phones, are not 100% work-related.
The Australian Taxation Office suggest keeping a diary or log of phone use for one month of each year to work out the work-related percentage to claim.
Jennifer will need to work out how much her mobile phone is used for work. We recommend using your call register as a guide to work this out. We encourage you to also consider that your phone may be used for much more than just phone calls when working out your work-related percentage.
How much tax will I get back?
If your wages and other income is between $45,000 and $120,000 you are paying income tax at the rate of 34.5%. This includes the Medicare Levy, but not the Medicare Levy Surcharge.
This means that any deductions you claim will reduce your income tax payable by 34.5%, or about one third.
If Jennifer's work-related expenses add up to $1,000, she will have a reduction in her income tax payable, or increase in her income tax refund of $345.
Disclaimer: information and rates are correct as of May 2022.