I’m always pretty cautious about what I claim as a tax deduction. I think it’s prudent to take this approach when you largely work from home, given there’s a definite grey area between what’s a work expense and what’s a personal expense.
Of course, some expenses are just flat out not allowed and attempting to claim them will immediately bring your tax affairs to the attention of the Tax Office, something we’d all like to avoid.
So this week, I thought it would be an idea to run through some of the expenses you’d be a fool to claim.
If you run or are employed by a travel agency and you work overseas in areas where you might catch diseases like malaria, you might think you can claim jabs to prevent you contracting something nasty.
Not so, says Maree Caulfield, director of taxation at MGI Accountants Adelaide.
“Medical costs are not deductible. This generally includes things like vaccinations, even if you are likely to be exposed to a particular disease in your job. But there may be a very limited option for a tax rebate for medical expenses,” she says.
Financial planner Peter Horsfield says you also can’t claim the cost of private health insurance.
Getting on it
Some readers will remember the heady days of the 1980s when it was perfectly fine to claim that bottle of Grange or five you sank with your ad agency. Not any more.
Caulfield explains entertainment expenses are generally not deductible, but it does depend on what fringe benefits tax is paid and where and to whom the entertainment is provided.
“It’s important to keep full records of all entertainment so that the deductibility and fringe benefits tax liability can be determined,” she advises.
Says Michael Griffiths, a director of Prosperity Advisers: “Examples of business-related entertainment which are not deductible include taking a client to lunch, or sharing a few beers or wines with a prospective client. Note there are some exceptions to this general rule though, including the ‘travelling away from home for work purposes’ provisions,” he says.
Your kids’ education and childcare
Readers might be interested to know I crunched the numbers a while back to see whether parents would be better off if they were able to claim the cost of childcare as a tax deduction. On my figures, the existing family tax bonus system delivers a better financial outcome. As a result, don’t even think about claiming kindy fees. They definitely won’t pass muster with the ATO.
As Caulfield notes, you can’t deduct the expenses even if your employer is asking you to work outside your normal hours and you need childcare to do that.
“You also can’t claim the cost of your children’s education, such as books and school fees. There used to be a rebate available for this, but that was replaced in January 2013 with the school kids’ bonus,” she explains.
I may have incurred the odd speeding and parking fine in my time when I’ve been out and about for work purposes and I have to admit, it has crossed my mind that I should be able to claim these extremely annoying and frustrating costs. Not so.
“You cannot claim a fine or penalty that you have to pay such as a speeding ticket or a late payment penalty, even if you incurred that while you were working,” Caulfield says.
The Rolls, Porsche or Merc
If you’re rich enough to drive a flash car, there are also limits on what you can claim for work purposes.
Griffiths says the cost of a car used in a business can generally be written off over its effective life.
“But this cost is limited to the luxury car limit which is currently $57,466. What this means is that, if a car is purchased costing more than $57,466, only the amount of $57,466 can be depreciated over the car’s effective life,” he says.
“Additionally, the cost of a car exceeding this limit is taken to be $57,466 for GST purposes. In other words, if you buy a car that costs $80,000, the maximum GST that can be claimed back is $5224.”
Other red flags for the ATO:
- Travel expenses to and from work.
- Social club fees.
- Personal grooming expenses.
- Telephone silent number expenses.
- Ordinary work clothes other than protective clothing, uniforms and occupation-specific clothing, for example a chef’s checked pants. So if you were to buy a suit that you only wear to and for work, you cannot claim its cost or its dry cleaning.
- Costs associated with getting a job such as travel for attending interviews, CV preparation or undertaking a police check.
- Costs to move location to start a new job with the same employer.
- Driver’s licence costs, although if you need a special class of licence to do your job then that may be deductible.
- Costs incurred while doing volunteer work.