By Tim Major, Consultant.

With tax season well underway, we are once again providing our handy Individual Tax Return checklist to assist you in compiling the information needed for the preparation of your individual tax return. You can download the checklist here.

Once you have all of the information required, please get in touch with us to make an appointment.

Tax specialist Tim Major has also put together the below list of expenses that are often considered to be deductible BUT are only so in very limited circumstances OR not at all.

 Gym membership

If it is a direct requirement of your employment that you need to be physically fit, it MAY be possible to claim a deduction for your gym membership.

Note that the case law in this area shows that the bar is set very high and whilst a police officer is ineligible a STAR force officer may be.

Professional sports people are also eligible, again, depending on the facts.  So the World Darts Champion would struggle to get a deduction, but a marathon runner or a tennis player would be more likely to.

Lottery Tickets

The fact that the lottery supports a recognised charity does NOT make a losing ticket a “donation”.  What you have paid for is a ticket in the draw, you have not donated directly to any charity.

The same applies to charity biscuits, tea towels and other products.  In all of these cases you are buying a product NOT donating to charity.

“Black and Whites” for Hospitality Workers

This is a tricky one, but the general rule of thumb is that generic clothing items required to be worn for work are NOT generally deductible.

The garments may be a specific colour and the employer may insist that you wear black pants and a white shirt, but the garments themselves are considered ordinary street clothing.

Whilst you might only ever wear these garments for work, another person might wear the same garment in a very different situation that is not in a work environment.

The litmus test is, would you look ‘odd’ if you put on these garments and went off to buy your groceries on a Saturday morning? 

Clearly, someone wearing scrubs, a lab coat or similar would look a little out of place in the check-out queue.  Whereas someone in black pants and a white shirt would not stand out in the same way.

Having the employers name or logo on these garments goes part of the way towards making the purchase a tax deduction.

Correlation between deductions and occupation

Much of the review work on individual tax returns is performed by the ATO computer and is based around “reasonableness” and correlation between your occupation and the types of claims you are making.

So, a person described as a public servant, who claims a large mileage deduction will stand out because the majority of taxpayers using that occupation code would have a desk job in a capital city office (or now be working from home!).

Similarly, it would be unusual to have high claims for BOTH mileage in your car AND working from home expenses because you cannot be working from home that much if you are driving 5,000 kms for the year.

The occupation codes have been enhanced in the past 10 years and there are more of these now than ever before.

This enables the computer to drill down, in a finite way, and make comparisons between data provided for people under the same occupation code.

These codes still don’t cover all occupations, nor more general roles such as manager, consultant or the like.

It is well worth keeping your occupation code and description up to date, in order to avoid any issues arising from the use of a code that no longer suits what it is that you do.

As with any item that you consider to be a deduction, it is important to provide us with the details and ensure that you have a valid receipt.

We can then decide if deductibility is appropriate, confident that you have adequate paperwork to back up your claim.

If you have been happy with the service we provide and have a friend or associate who needs accounting services, please recommend us. We would be pleased to provide them with the same high level of service we provide to all our existing clients.

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The information provided in this article is general in nature and does not take into account any person's particular financial situation or needs. Please contact us for advice specific to your circumstances.

This information is current at the time of publication and further updates may have occurred since that date.