For most Australians, taxes is a massive hassle. The enormous amount of paperwork, paired with the bureaucratic hassle and complying with the plethora of laws, can be challenging. However, a lack of knowledge about taxes can be disastrous. To make life smoother for small businesses, the Australian Government provides a significant number of deductions and subsidies. These tax deductions can be incredibly beneficial for people who are struggling to find their feet in the business world.
In this article, we will discuss all the nooks and crannies of tax deductions in Australia. Let’s begin!
What is a Tax Deduction:
A tax deduction is a deduction that allows a business or an individual to lower the amount of tax it has to pay. Multiple factors are used to deduct an amount from the taxable income. Generally, tax deductions are expenses that you make for your business that are subsidised by the Australian Government.
However, tax deductions in Australia are very technical. So they require some bit of effort from you. But tax deductions can be crucial for you in the long run.
Types of Tax Deductions in Australia:
Generally, you’re eligible for multiple types of tax deductions in Australia. These include:
Home Office Deductions:
The COVID-19 pandemic has changed work environments for us drastically. One of the significant changes is the shift to “work from home” or home-offices. Many employers have allowed their employers to work from home instead of travelling to their workplace to keep them safe.
To make the transition to home offices smooth, the Australian Government provides tax-deductions to individuals and businesses. In this case, you’d get deductions for office-related expenses. These include phone and internet bills, stationery and computer parts, and furniture and appliances related to the home office.
However, you’d be eligible for a tax deduction on furniture if the furniture cost is below 300AUD and it’s only for home office purposes. Furthermore, typical household expenses that are viable for home offices are not considered for tax deductions. These include; rents, mortgages, electric bills, household expenses, etc.
Clothing and Uniform Related Expenses:
Many workplaces require you to wear a uniform for work reasons. Furthermore, you might need to wear protective clothing to protect yourself from the risks in your workplace. You need to spend an amount of money every year purchasing, cleaning, and repairing these clothes. In certain situations, you would be eligible for tax deductions on these clothes.
You can get tax deductions for clothing in Australia, but it can be very technical. Firstly, you’d receive tax deductions for your work clothing if they’re unique to your workplace. These include specific uniforms, costumes, and clothes with logos on them. However, if you need to buy standard clothing for work, such as suits or dress shirts, they won’t be considered for tax deductions.
Furthermore, if your area of work requires protective equipment such as hard hats, protective clothes, and shoes, you’d receive tax deductions for them. Also, if you have to spend a considerable amount of money every year cleaning and maintaining them, you’d receive tax deductions for them as well. However, you have to show adequate proof, such as receipts and records, to be eligible.
If your work requires you to travel regularly, you might be able to receive tax deductions on your travel costs. However, there are a few factors involved.
To begin with, you won’t get a tax deduction in Australia for traveling from your home to your workplace and vice versa. If your home is a base for work or you have to travel to an alternative workplace, you’d be eligible for a tax cut.
However, if you have to travel to a different region for work purposes, you can receive a tax cut for it. Also, you’d still have to show proof of your travels to the relevant authority.
Finally, in the case of transfers and relocations, you won’t be eligible for a tax cut unless there’s an emergency issue.
Skill development is essential for development in any field of work. Different courses and training are a great way to amplify our skills and take us to the next level. However, training can be expensive, and that’s why the Government is willing to help.
If you’re doing a course that’s important for your work, you can apply for a tax deduction. However, it will not be applicable to your student debt or loans. Also, you might not receive a deduction on your entire cost, so keep that in check as well.
Industry Related Expenses:
The Australian Government subsidises certain industry-related expenses. If you’re working in such an industry, you might be eligible for specific tax cuts and deductions.
The Australian Taxation Office has a detailed list of professions where you are eligible for tax deductions in Australia. Check the list to see whether your area of work is suitable.
Charity and Donations:
Most companies tend to make donations as a part of their Corporate social responsibilities. While these donations are great for charities that work for a cause, they can reduce your taxes by a bit as well.
You can claim certain donations for tax deductions. Also, any gift you send to charities and companies, you can put that up for tax reductions as well. Although these are very technical, they might be beneficial for your business.
If you have savings and investments, you can receive tax deductions based on them as well. These include interest payment in your savings, dividends from shares, profits from other businesses, rents from owned properties, etc.
Paying taxes is essential for any citizen. Taxes help keep the country running and ensure all the citizens are taken care of. However, many times our taxes can be too much for us to bear. Especially for small businesses, too much taxes are a problem.
Tax deductions in Australia are a great way to save money. However, people tend to get flustered by the rules around them. In this article, we’ve discussed everything you need to know about tax deductions in Australia. We hope you find this article useful!