The most overlooked tax deductions revealed

Most people get less tax back in their refund than they should because they don’t claim all they’re entitled to. This is what you need to know.

At tax time, every dollar counts. The reality is that most people get less tax back in their refund than they should, simply because they don’t claim everything they’re entitled to.

If your income is above $45,000 p.a., you receive at least a third of every dollar of tax deductions back in your tax refund, so you want to make sure you’re claiming everything you can.

With tax time just around the corner, I wanted to cover some of the most commonly overlooked tax deductions so you don’t leave money on the table.

Motor vehicle expenses

You can claim tax deductions for your car of up to $4250 without keeping a log book, and even more following the log book method. This can mean thousands of dollars back in your pocket at tax time, and given motor vehicle and petrol costs are on the rise, this can be a quick and easy win.

If you travel in a private vehicle for work purposes, there are two methods you can use to claim deductions for your car. The log book method, where you track all of your trips and kilometres travelled, which you use to compute the percentage of your travel that’s work related. Once you have your work related travel percentage, you can deduct that percentage of your motor vehicle costs, including everything from petrol to servicing, insurance, and everything in between.

The other method is the “fixed-rate” method, where you claim a set deduction of $0.85 for every kilometre you travel for work purposes, up to a maximum of 5000 kilometres each year ($4250 total deduction). Under this method you don’t need to keep a strict log book, but you do need to keep records of your work trips in case the Australian Taxation Office (ATO) asks you to substantiate your claim.

It’s worth noting with both methods, that for travel to be work related it needs to be part of your actual work, and not just you travelling to and from your office or worksite. Travelling between office locations, visiting clients or travelling to your suppliers would all fit under this umbrella.

If you drive a car for work, you could save in tax. Picture: iStock

Home office expenses

With the work-from-home trend here to stay, more Aussies are spending time working from home office locations – but not everyone is claiming the tax deductions they’re entitled to for their home office.

If you work from home, you can generally claim expenses for your office supplies, stationary, printing, etc. But you can also claim part of your power and utilities, internet, and even potentially part of your rent or mortgage as a tax deduction. For most people, this means some pretty significant tax savings are on offer.

The ATO again has a couple of methods you can use to claim your home office expenses, a fixed-rate method based on the hours you work at home, or the percentage method if you have a dedicated work-only space.

For either method, there are some complexities to the rules that you should be across before you lodge your tax return, and this is an area the ATO are looking closely at. You should claim everything you’re entitled to, but you don’t want to end up in hot water with the ATO so it’s worth building your knowledge and getting some good advice.

Self education expenses

Expenses for self education and professional development can run into the thousands of dollars each year. If the goal of any education or training is increasing your employment income, these expenses are generally tax deductible under the ATO’s rules.

You can also generally deduct the cost of content subscriptions that help with your work, like newspaper or online news site subscriptions. This means that along with formal study, any short courses, online training, or other content-based education can help to cut your tax bill.

Data shows that 30 per cent of Aussies spend an average of $1936 on professional education each year, which means there are some significant tax deductions up for grabs.

Those studying can also claim back on their tax. Picture: iStock

Tax and investing advice

The cost of getting professional help and advice around your tax and investing can also be tax deductible under the ATO’s rules. It gets a little blurry but typically tax advice is a straightforward deduction, and if you’re getting ongoing advice around building investment wealth and investment income, this can also be tax deductible.

This means you can get some help to grow your money, create another income stream, and cut your tax bill at the same time.

The wrap

At tax time you’ve got two choices. You can take the time to understand all the rules and take full advantage, get a bigger tax refund, keep more of your hard earned income, and get a head start on the year ahead.

Or you can cruise along, be reactive, and hope for the best – but know you’re probably leaving money on the table.

The rules around tax can be a little complicated and confusing, but taking the time to level up your knowledge will make you more money from what you already have, and get you a better result both this year and into the years ahead.

Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth, and Author of the Amazon Best Selling Book ‘Get Unstuck: Your guide to creating a life not limited by money’.

Ben has just launched a series of free online money education events to help you get on the front financial foot. You can check out all the details and book your place here.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs.

Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where