Tax time can feel stressful; however paying close attention to allowable deductions may reduce your taxable income and also lower the tax you need to pay on your tax return. Here are some allowable deductions you may wish to consider when preparing your next return.
While every person’s financial circumstances are unique, it can be helpful to be aware of some of the different deductions that may apply to you come tax time.
- Tax agent costs – hiring a registered tax agent to lodge your tax return is a great way of organising your finances, however sometimes it can be expensive. The good news is that you may be able to deduct any fee you incur for your agent to prepare or lodge your tax return in the next financial year.
- Charitable contributions – when you next make a donation, check if the organisation is a deductible gift recipient (DGR) and the amount is over $2. If so, then you may be able to claim any donations you have made as a tax deduction. To qualify, the donations must have been made with nothing received or expected to be received in return and be recorded with a receipt. You can check if the organisation has a DGR status here.
- Insurance premiums – generally premiums paid by Australian resident individuals for income protection insurance under a policy they own may be claimed as a tax deduction to the extent that the premiums are paid for benefits that are designed to replace the individual’s lost income. In the event that you claim on your income protection policy, any income replacement benefits received are generally assessable as income and liable for tax just like your regular income. To find out more about claiming tax deductions for insurance premiums, read our article here.
- Education and training - if you are completing any courses that relate to your current job, lead to formal qualifications, improve your skills or knowledge and are likely to lead to increased income, then these course fees may be deductible. Any other costs associated with undertaking the course may also be deductible such as textbooks, student service fees and travel between home or work and the place of education.
- Miscellaneous items – certain job-specific purchases can be valid tax deductions. For example, if your job requires you to spend time outside on a daily basis then you may be able to claim a deduction for sunscreen costs. You may be able to claim a deduction for a handbag or satchel you buy to carry items for work purposes such as laptops, tablets or work papers. The amount of the deduction depends on the extent you use the bag for work purposes. You can find out more information on the ATO website.
Your life is unique and so are your personal finances. There is no one-size fits all approach, so you should take into consideration your individual circumstances when preparing and lodging your tax return and seek expert advice. To make the most informed tax decisions on your circumstances you should seek professional advice from a registered tax agent or registered tax adviser.
For more information about tax and life insurance, read our ‘Tax deductions for Insurance Premiums’ article.
All information refers to Australian resident individual taxpayers and has been informed by the Australian Tax Office website. Information was correct at time of writing (March 2020).
Information provided in respect of taxation law is given in good faith and for the general information purposes of Australian tax residents only. It is believed to be accurate as at 12 March 2020 but may be subject to change. TAL is not liable for any losses that may arise from reliance on this information. TAL does not give, and does not purport to give, any tax advice. As the application of tax law depends on each person’s individual circumstances, you should always seek advice from a qualified tax professional.