It’s almost the end of another year – financial year that is.
Have you ever found yourself asking “What can I claim on my taxes?”
As mums we are a pretty mixed bag when it comes to how we earn a living; so understanding what you can claim on your taxes can be pretty darn confusing.
According to the Australian Government’s Workplace Gender Equality Agency – women constitute:
- 69.9% of all part-time employees
- 35.7% of all full-time employees
- 54.7% of all casual employees
And women also make up about 31% of all small to medium sized enterprises across Australia. So it’s clear that as Australian women, we tend to work predominantly in either small business or in a part time or casual capacity as employees.
In some cases, you might have foot in each camp – part business owner, part employee.
I don’t really need to explain this phenomenon to you – you’re living it! Motherhood brings with it new priorities and responsibilities that see us in a juggling act of managing households, earning a living and raising a family. Out of necessity or a desire to make a financial contribution to the running of the household, we seek out ways to earn an income.
At tax time however, this can make things a little complicated as the lines can sometimes be blurred between business, personal and employment related expenses when you’re a mum.
Employment related tax deductions
Working as an employee?
Whether it’s full-time, part-time or casual, here’s the low down on what you can deduct from your income at tax time:
- Professional / employment related membership fees
- Books, periodicals and digital information
- Cost of managing tax affairs
- Income protection insurance
- Mobile and home phone expenses (if used for work purposes & you do not have a work phone that is separately provided)
- Personal super contributions
- Seminars, conferences and education workshops related to your employment
- Vehicle and travel expenses (for work related travel and with the exception of everyday travel between home & work)
- Clothing, laundry and dry-cleaning (for occupation specific uniforms & protective clothing only)
- Gifts and donations
- Home office expenses
- Interest, dividend and other investment income deductions
- Self-education expenses on eligible courses (work related)
- Tools, equipment and other equipment
- Calculating depreciation/decline in value of assets
This list is not exhaustive but covers most of what the ATO lists as deductible on their website here.
To be able to claim something as an employee from the above list, you must be able to satisfy that:
- You’ve spent the money already & haven’t been reimbursed
- It’s related to your employment
- You’ve got a record of the expense (e.g. receipt, bank statement, diary entry)
The ATO have a range of FREE useful resources on this:
- Occupation Guides: deductions specific to range of common occupations
- my Deductions App: allows you to capture and store receipts for deductions for tax time as well as track car related expenses that you claim
What about your handbag?
Earlier this year there was some hype in the media about now being able to claim a deduction for your handbag.
I’ve never spent much on handbag’s – I’m still at a point in my life where I’m lucky if I don’t find a half-eaten something at the bottom of mine every day so I’m not at the point where I’d like to invest any money into a lovely bag that’s all mine!
However, if this is you – then yes, you can claim a deduction, but here’s the thing. You need to be able to argue (and prove) that it’s for work-related purposes. So if it’s a pretty Prada purse and you’re not carrying a laptop, some client files or a work iPad in it, then that could be difficult to prove.
The next bit relates to what it costs. If it’s more than $300, you’ll need to depreciate it over a number of years which essentially diminishes any tax savings up front. It you find one for under $300 you can make an immediate deduction for the total cost (or to the percentage it’s used for work).
If you’re self-employed though – the numbers work out a little better thanks to the $20,000 limit on assets that qualify for immediate deductions for small business. As long as you find a bag for less than this, you can claim the entire amount in the tax year in which you bought it.
But let’s face it – if you’re in a position to be buying $20,000 handbags, you probably not too worried about the hundred’s in tax you’ll be saving.
Home based business deductions
Running your own show or side-show at home?
In addition to claiming a deduction for your work related handbag purchase – here’s the low down on what else you deduct at tax time:
Occupancy expenses
If you run the business from home – you may be able to claim a proportion of the costs associated with occupying your home. This includes expenses like rent, mortgage interest, council rates or home and contents and other household insurances.
To work out if you are entitled to claim occupancy expenses, you have to pass what the Tax Office calls the ‘interest deductibility test’.
In order to claim a deduction for any occupancy expense, the ATO expects that you have a specified area set aside exclusively for working needs. They describe this space as needing to have the ‘character of a place of business’.
Simply having a home office (desk with laptop) in the corner of the living room or working at the dining room table does not generally meet this test according to the ATO’s website.
In other words, it needs to look like a home photography studio, a home caterer’s kitchen or a home hair dressing salon all the time – where the actual business area is well defined.
You can read more about how the deduction is actually calculated here and it’s important to note that if you do claim occupancy expenses this will impact the CGT you pay if you sell your home in the future.
Running expenses
You’re entitled to claim a percentage of the costs associated with using the facilities in your home to help run your business as running costs. Things like electricity, gas, phone bills, and internet are some common examples.
You’re allowed to claim these expenses on the premise that these costs are increased because of your home based business activities.
How much you can claim is an art more than a science. The ATO gives you some examples of calculating these amounts include using a like for like percentage deduction based on the floor area your business takes up at home or where there is no designated space, comparing utility bills from before and after you started your business to arrive at an estimate of the increase.
You can read more about how to calculate the deduction for running expenses here and claiming running expenses for your home based business won’t mean you pay CGT in the event you sell your home.
Vehicle expenses
If you’re running a business from home, you can claim the cost of work related car travel between home and other places.
The ATO states that you can claim car trips associated with things like, purchasing supplies, doing your business banking, trips to the post office or seeing the accountant.
The ATO even has a calculator to help with calculating the deductions you can claim for vehicle expenses.
Of course, you need to keep accurate records which takes some commitment if you are to use this expense as a tax deduction. I would check out the myDeductions app that they have developed which is designed to help with logging travel as well as capturing receipts for associated expenses like petrol costs.
Other useful information
I would highly recommend, in addition to the ATO’s sight, Taxpayer’s Australia. This website is full of useful information on taxation matters for both individual’s and business’s alike and they even provide some handy checklists to help with compiling information at tax time.
Hopefully that gives you some clarity on what you can claim come time to do your tax this year – no matter how you earn and income!
And you’ll start the new year financial year with a fresh understanding of tax deductible expenses and what you can claim on your taxes so that you can be your most organised self going forward!!
Rebecca
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