2023 Please read prior to your appointment

BTW there is no such thing as a standard deduction. You are exempt from providing receipts for deductions under $300 in total, but you must have spent the money in order to claim.

The ATO’s system gets more complicated and intelligent every single year. I advise all clients to be conservative in their estimates in work related use.

If you also have a rental property, please read this article as well

Records for claiming work-related expenses

When completing your tax return, you’re entitled to claim deductions for some expenses, most of which are directly related to earning your income.

To successfully claim a deduction for work-related expenses, it’s important that you must have spent the money yourself and weren’t reimbursed, it must be directly related to earning your income, and importantly you must have a record to prove it.

You can only claim the work-related part of expenses. If an expense relates to both work and personal use, the ATO will expect that you apportion use on a reasonable basis and only claim the work-related portion.

Keeping your records

You need to keep your records for five years from the date you lodge your tax return.

As the ATO may ask that you produce your records during the five years, it is important that you have sufficient evidence to support your claims.

Note that if you paid cash to a supplier and have no other documentation to support your claim, you will not have sufficient evidence to claim a deduction.

How the record-keeping rules apply to different expenses

Car expenses

The type of car expense records you need to keep depends on whether you use the cents per kilometre method or logbook method to record the expenses.

Method 1: Cents per kilometre

You don’t need receipts, but you need to be able to show how you worked out your business kilometres (for example, by producing diary records of your work-related trips).

If you use the cents per kilometre method, your claim is based on a set rate (68c per kilometre from 1 July 2018) for each business kilometre travelled. You can claim a maximum of 5,000 kilometres per car.

Method 2: Logbook

Your claim must be based on the percentage of work use of your car. To work this out you need to keep a logbook. Your logbook is valid for five years, but you can start a new one at any time. Your logbook must:

• cover a minimum continuous period of 12 weeks and be broadly representative of your travel throughout the year
• include the purpose of every journey, odometer reading at the start and end of each journey and total kilometres travelled during the period
• include odometer readings at the start and end of each income year.

You can claim fuel and oil costs based on your actual receipts, or you can estimate the expenses based on odometer readings from the start and the end of the period in which you used the car during the year.

You must keep:

• original receipts for all other expenses for the car
• details of how you calculated your claim for the decline in value for your car, including the effective life and the method used.

If your claim relates to the transport of bulky tools and equipment, you will need:

• a record of all work items carried
• the weight and size of all work items
• evidence that the items carried are essential to your work
• evidence that your employer-provided no secure storage at the workplace.

Note: If you borrowed a car or used a vehicle other than a car (for example, a motor cycle or a vehicle with a carrying capacity over one tonne, such as a utility truck or panel van) you cannot claim your expenses using either of the two methods.

Instead, you need to keep all your receipts (such as fuel and repairs) and claim the work-related portion of these costs as a travel expense, not a car expense. Also, remember to include on your tax return any allowances that you receive from your employer for car expenses.

Travel expenses

There are specific record-keeping requirements for travel expenses, depending on:

• whether your travel allowance is shown on your payment summary
• whether your travel was domestic or overseas
• the length of your travel and your occupation.

Travel records you should keep include:

• a travel diary or itinerary, if your travel was for six nights or more
• receipts for all meals, airfares, accommodation, car parking and tolls
• an explanation of how the travel was work-related, the number of nights you slept away from home and the location.

If your travel allowance is shown on your payment summary and you want to make a claim against it, you must have written evidence for the whole amount, not just the excess over the reasonable amount.

Note: Reasonable amounts for accommodation, meals and incidentals are provided to make record-keeping simpler, not to provide an automatic deduction – you can only claim the amount you spent. Although you may not need records, you will still need to be able to explain how you calculated your claim.

Clothing, laundry and dry‑cleaning expenses

Clothing. You need to keep receipts to claim for the purchase of occupation-specific clothing, protective clothing, or unique and distinctive uniforms.

Laundry. To claim a deduction for laundering occupation-specific clothing, protective clothing or unique and distinctive uniforms, you must keep details of how you calculated your claim.

Dry-cleaning. If you use a dry-cleaning service for the clothes, you need to keep receipts.

Phone and internet

Claiming less than $50. If the work use of your phone is incidental, and you are not claiming a deduction of more than $50, you may make a claim based on the following:

• $0.25 for each work call made from your landline
• $0.75 for each work call made from your mobile
• $0.10 for each text message sent from your mobile.

Claiming more than $50. To claim a deduction of more than $50 you must:

• keep all your phone and internet bills for the year
• show how much is related to work.

If your bills are itemized. Highlight all your work-related calls in a four-week period, which can then be applied to the full period.

If your bills are not itemized or only part of the service is itemized. Keep a diary covering a representative four-week period showing how often you used your phone and internet for work. This pattern of work use can then be applied to the full period.

Bundled plans. If you have a bundled plan, keep a diary covering a representative four-week period showing how often you use each service for work. This pattern of work use can then be applied to the full period. Work out your work use by recording:

• internet:
• the amount of data downloaded for work as a percentage of the total data downloaded by all members of your household
• phone:
• the number of work calls made as a percentage of total calls
• the amount of time spent on work calls as a percentage of your total calls.

Note: Unless you only use your phone and/or internet for work, you will have to determine the work-related portion of your expenses. Keep a record of the calculation and only claim that amount.

Working from home

From 1 July 2022, the ATO has explained that taxpayers who are working from home can claim deductions based on their actual expenses, or they can potentially adopt a revised fixed rate method which uses a rate of 67 cents per hour.

To use the revised fixed rate method, you must meet the following basic conditions:

• You must be working from home while carrying out your employment duties or carrying on your business on or after 1 July 2022;
• You must be incurring specific additional running expenses which are deductible under section 8-1 as a result of working from home; and
• You must keep and retain relevant records in respect of the time you spend working from home and for the additional running expenses you are incurring.

The running expenses covered by this method are:

• Energy expenses (electricity and/or gas) for lighting, heating/cooling and electronic items used while working from home;
• Internet expenses;
• Mobile and/or home telephone expenses; and
• Stationery and computer consumables.

While no separate deduction can be claimed for the expenses listed above if using the revised fixed rate method, you can potentially still claim depreciation deductions for assets used while working from home (e.g. computer, desk, chair, etc) along with any other running expenses not listed above, provided the normal tax deductibility requirements are satisfied.

A key change is that you do not need to have a separate home office or dedicated work area set aside in your home in order to rely on the fixed rate method.

Also, if more than one individual is working from home at the same time, each individual will be able to apply the fixed rate method if they each meet the requirements listed above.

This new practical compliance guideline from the ATO has been issued in DRAFT form and the final guidance may change. We will keep you informed of any changes, but we strongly recommend you start to keep the records the ATO has listed in their guideline.

VERY IMPORTANT: THE RECORDS YOU NEED TO KEEP

You need to keep the following records to prove your working from home tax deductions for the 2023 financial year:

• A record which is representative of the total number of hours you worked from home during the period from 1 July 2022 to 28 February 2023; and
• A record of the total number of actual hours you worked from home for the period 1 March 2023 to 30 June 2023.

For the 2024 and later financial years, the ATO expects you to keep a record for the entire income year of the number of hours they worked from home during that income year. An estimate for the entire income year or an estimate based on the number of hours worked from home during a particular period will not be accepted. 

NEXT STEPS

To use the revised fixed rate method and claim 67 cents per hour for working from home expenses in your upcoming 2023 Tax Return, you will need to IMMEDIATELY start to keep a record of your actual hours working from home.

A record of your hours for the income year can be in the form of:

• timesheets
• rosters
• a diary or similar document kept contemporaneously.

You must also keep evidence for each of the additional running expenses that you incurred. The documents you need to keep in order to demonstrate that you have incurred additional running expenses must show what the expense is and that you incurred the expense.

For energy, mobile and/or home telephone and internet expenses, you must keep one monthly or quarterly bill. If the bill is not in your name, you will also have to keep additional evidence showing you incurred the expenses; for example, a joint credit card statement showing payment or a lease agreement showing you share the property, and therefore the expenses, with others.

For stationery and computer consumables, which are occasional expenses, you must keep one receipt for each item purchased.

Self-education expenses You must keep receipts for all self-education expenses, including course fees, textbooks, stationery and travel expenses. You must also be able to explain how the course directly related to your employment at the time of study.

If you are claiming the portion of a depreciating asset that you have used for self-education (such as a laptop), you must keep receipts and a depreciation schedule, or details of how you calculated your claim for the decline in value.