Work-related deductions: the three rules every claim has to pass

Work-related deductions are the most claimed and most misunderstood part of the individual tax return. Every year the ATO publishes examples of claims that were refused, and almost all of them fail on the same three tests.

The three rules every claim must pass

You spent the money yourself and were not reimbursed. If your employer paid for it, or paid you back, it is not your deduction.
The expense directly relates to earning your income. Not “related to my industry” or “useful for my career” — directly connected to the income you actually earned.
You have a record to prove it. A receipt, invoice or bank statement showing what, when, how much and from whom.

If an expense is partly private, you can only claim the work-related portion, and you need a reasonable basis for the split.

The $300 rule, and what it does not mean

If your total work-related expense claims come to $300 or less, you do not need written evidence for them. This is the most misread rule in the tax system.

It does not mean you get an automatic $300 deduction. You still have to have actually spent the money on something work-related, and you still need to be able to explain how you worked the figure out. Claiming a round $300 you never spent is a false statement, not a shortcut.

Note also that the $300 threshold excludes car expenses, meal allowance, award transport payments and travel allowance expenses — those have their own rules.

Commonly claimed, commonly correct

Tools and equipment — immediate deduction if $300 or less, otherwise depreciated over the effective life
Protective clothing and compulsory uniforms — steel-cap boots, hi-vis, sun protection for outdoor work, and uniforms with a registered design
Self-education — where the course directly relates to your current employment, not a future career change
Union fees and professional association memberships
Professional subscriptions, journals and technical publications
Home office running expenses — via the fixed rate or actual cost method
Phone and internet — the work-related share, if you are not already using the fixed rate method
Income protection insurance premiums (but not life or trauma cover)
Tax agent fees — including what you paid us last year

Commonly claimed, commonly wrong

Conventional clothing. A suit is not deductible, no matter how strictly your employer requires it. Neither are plain black pants and a white shirt.
Travel between home and work. Private, with narrow exceptions for bulky equipment and travel between workplaces.
Grooming, haircuts and gym memberships. Deductible only in genuinely exceptional occupations, and rarely then.
Meals during a normal working day. Even when you are working overtime, unless you received an award overtime meal allowance.
Self-education for a new field. Study to get a different job is not deductible — it relates to future income, not current income.
The whole cost of a dual-purpose item. A laptop used 60% for work is a 60% claim.

Occupation-specific guides are worth reading

The ATO publishes deduction guides for over 40 occupations — nurses, teachers, tradies, real estate agents, truck drivers, hospitality workers, IT professionals and more. They are short and they set out exactly what that occupation can and cannot claim. If you are in one of them, it is ten minutes well spent.

How long to keep records

Five years from the date you lodge. If a deduction relates to a depreciating asset, keep the records for five years from the date of your last claim on that asset. Digital copies are fine — a photo of a receipt is a valid record, and far more durable than thermal paper.

Need a hand with this?

Most people either overclaim and expose themselves to an audit, or underclaim and quietly pay too much tax. We go through your actual situation and work out what is genuinely available to you.

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Sources

This article is general information only and does not take your personal circumstances into account. Rates and thresholds are current at the date of publication. Speak to us before acting on anything you read here.