Tax deductions misconceptions: What you can’t claim
Here are some misconceptions about deductions that many taxpayers commonly believe to be claimable, but are typically rejected by the Tax Office. While some are obviously not allowable, they have all been genuinely attempted to be claimed — and in most instances knocked back. Other disallowed claims, however, may surprise.
While the Tax Office may reject the following in the first instance, taxpayers who believe they have a “reasonably arguable position” should consult this office for more advice.
Vehicle expenses made while earning assessable income are allowable – such as repairs, servicing, interest on a car loan, etc. But the cost of a standard driver’s licence is not – even if having one is a condition of employment. However any extra on the cost of a “standard” licence could be allowable (one of those “reasonably arguable” examples). The costs of defending a driving charge, even where one’s job is conditional on holding a licence, are not deductible.
A deduction is generally not allowable for vaccination against diseases that an employee may come into contact with in the course of work; for example airline employees. Some disease protection, for example for cattle-borne Q fever, may be allowed.
Child minding expenses
Expenses for having someone care for children during working hours are not deductible, even when this is necessary to secure job advancement. There is however the child care rebate and the child care benefit available through the transfer system.
Commuting to and from work
Travelling between home and work is not generally deductible, even where incidental work tasks are performed on the way. Certain circumstances may allow a deduction, such as carrying bulky equipment in situations where the equipment cannot be secured or stored at the taxpayer’s place of work (such as tradies).
Even though a high standard of appearance may be required at some workplaces, expenses such as hairdressing or cosmetics are not usually deductible. Not even Defence Force personnel get a deduction for grooming, even if this is to meet military regulations. Anyone constantly exposed to chlorinated water (such as a hydrotherapy assistant) could have a case for claiming moisturisers and conditioners.
Relocation expenses made by an employee
Expenses from changing employment, such as costs of moving house or meeting an employment agreement, are not generally deductible. The reason given is that the expense comes “at a point too soon” to be regarded as having been incurred in gaining assessable income. The same reason has been used to deny taxpayers on unemployment benefits a deduction for expenses such as relocation to secure a job.
Police clearance and record checks
Any expenditure that is required to meet prerequisites to securing particular employment, such as a police clearance certificate or record check, is not deductible. The reason given here is much the same, that these costs are made “at a point too soon”.
Telephone “silent number” fee
While the work-related portion of telephone costs can be deductible, the cost of maintaining a “silent” landline number for privacy (for example, to protect a police officer’s home and family members) is not allowed as a deduction, as it is considered a private expense.
In general terms, the cost of a meal is not deductible as it is a private expense. There are some situations where meal costs are deductible. The taxpayer will need to demonstrate that the expenditure has a sufficient connection to their income earning activity. For example, the cost of dinner incurred by an employee who is required to travel away from home on an overnight business trip would in most instances be deductible.
The cost of establishing your business
Certain costs of establishing a business are regarded as having been made “at a point too soon” to be connected to generating assessable income and therefore are non-deductible. Likewise, preliminary costs (feasibility studies etc) cannot be claimed.
Certain business-related capital expenditure – such as the costs of incorporating a company are on capital account and the expenditure may be deducted over five years. Note however that the 2015-16 Federal Budget has proposed allowing an immediate deduction for professional expenses associated with starting a new business, such as the costs of legal and accounting advice. This has not yet been legislated, so watch this space.
All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication will be liable in any way for any loss or damage suffered by any person through the use of or access to this information.