Claiming non-work expenses on your tax return

Tax time can be a confusing time for many of us as we scramble to find receipts and struggle to know what we can and can’t claim.

Non-work expenses are a deduction that is often forgotten about but can seriously drop your taxable income.

So what can you claim?

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What non-work expenses can you claim on tax?

There a number of non-work expenses the Australian Tax Office (ATO) will allow you to claim for in your tax return:

Superannuation contributions

An ATO spokesperson told Savings.com.au there were a number of ways you can grow your super to make a positive difference to your lifestyle in retirement but only a personal superannuation contribution payment could be claimed as a deduction in your tax return.

“A personal super contribution is a payment that you made to your super fund from your after-tax income, for example, from your bank account directly to your super fund,” they said.

“You must meet the specific eligibility criteria and your super fund must acknowledge (approve) the valid Notice of intent to claim form (NAT 71121) you lodged with them before you claim a Personal Superannuation Contribution Deduction in your tax return.”

According to the ATO, some people mistakenly try to claim superannuation payments paid by their employer from their before-tax income.

“Examples of non-deductible super payments include;

• the compulsory super guarantee

• salary sacrifice amounts

• reportable employer super contributions shown on your annual payment summary.”

Mark Chapman, Director of Tax Communications at H&R Block, said you can only make up to $25,000 in additional concessional super contributions and claim a deduction for doing so.

“If you want to make personal contributions, make sure you don’t breach your concessional contributions cap,” Mr Chapman told Savings.com.au.

“The super guarantee payments made by your employer, as well as any salary sacrificed contributions, are included in your concessional contributions so effectively the amount you can pay into super through a tax-deductible contribution is the difference between those other contributions and the $25,000 cap.

“If you are aged between 65 and 74 years of age, you’ll still need to pass the work test to make a tax-deductible contribution. That means that you have to work 40 hours or more in a consecutive 30 day period in the financial year in order to make contributions.”

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Donations

The ATO says that for a donation to be deductible, it must be given to an organisation endorsed as a deductible gift recipient (DGR).

“A DGR is a not-for-profit organisation (including some charities) that is entitled to receive gifts that are tax-deductible,” the ATO spokesperson said.

“Not all charities or good causes are endorsed DGRs. People should confirm the DGR status of an organisation they have donated to by checking the current list of DGR entities before claiming a deduction.”

Mr Chapman said you can claim deductions for donations to any DGRs where the amount of the gift is $2 or more, with no maximum limit.

However, for donations of property, there are different rules, depending on the type of property and its value.

“For instance, if you make a gift of property, which could mean anything from clothing to jewellery to land or buildings, you can claim a deduction provided you acquired the property less than 12 months before you gifted it,” Mr Chapman said.

“The amount you can claim is the lower of the market value of the property at the date you gifted it – so you may need to get an expert opinion as to what it’s worth – and the amount your originally paid for it. If the property was bought 12 months or more before the gift, you can only claim a deduction if the value of the property was $5,000 or more. You’ll need to obtain a valuation from the ATO.”

It’s vital you always get a receipt for donations as the ATO may seek proof you actually made the donation. However, the ATO said receipts weren’t necessary for donations made to bucket collections.

“People may also at times make donations of $2 or more to bucket collections conducted by a DGR in respect of a natural disaster. You are able to claim a tax deduction of up to $10 for the total of those contributions for the year without a receipt.”

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Gifts

Mr Chapman said for you to claim a tax deduction for a gift, it must meet a number of conditions.

• “The gift must be made to a DGR.

• “The gift must truly be a gift. A gift is a voluntary transfer of money or property where you receive nothing in return.

• “The gift must be money or property, which includes financial assets such as shares.

“You can’t claim as a gift or donation anything that provides you with a personal benefit, such as:

• raffle tickets,

• items such as chocolates and pens,

• the cost of attending fundraising dinners, even if the cost exceeds the value of the dinner.”

He added it was possible to claim a portion of your contribution to a fundraising event deduction if the contribution is for an eligible fundraising event, organised for a DGR and conducted in Australia, including fetes, balls, gala shows, dinners, performances, and similar events.

“If you make a contribution of money, such as buying a ticket, you can only claim a deduction if the amount spent is over $150. If you make a contribution of property, the property must be valued at more than $150, if purchased within 12 months of making the contribution, or $5,000 if purchased more than 12 months before the contribution.”

“Fundraising events held by political parties are ineligible for this concession.”

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Interest, dividends and share income expenses

According to the ATO, you’re able to claim account-keeping fees for an account provided it’s used for investment purposes, such as a cash management account.

If it’s a joint account, you can only claim for your share of fees or charges on the account. So if you and your significant other have an equal stake in the account, you can only claim for half of the fees incurred.

You’re also able to claim for interest charged on funds you borrowed to purchase shares and other investments which provide interest or dividends.

The ATO said you can claim:

• Ongoing management fees or retainers and amounts paid for advice relating to changes in the mix of investment.

• A portion of other costs if they were incurred in managing your investments, such as:

  • some travel expenses

  • the cost of specialist investment journals and subscriptions

  • borrowing costs

  • the cost of internet access

  • the decline in value of your computer.

• A deduction of 50% of the LIC (listed investment company) capital gain amount if you were an Australian resident when the LIC paid you a dividend, and the dividend included a LIC capital gain amount.

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The cost of organising your return

Mr Chapman said you can claim a deduction for any costs you incur on managing your tax affairs.

“That can include the cost of getting your tax return done by a registered tax agent, as well as associated costs like using your car to drive to the tax agent or the cost of any other travel you incur in making the journey (such as public transport, toll road fees, etc),” he said.

Lesser-known deductions

There a number of small relatively unknown deductions you can claim that won’t apply to a lot of us which include:

• Income protection insurance premiums: You can claim or any part of the premium that protects you against the loss of income except when you take your policy out through your superannuation fund. You also can’t claim for a part of a premium that compensates you for a physical injury.

• Union fees: These can be claimed in full, no matter the cost.

• Political membership fees: If you pay a membership subscription to a registered political party, you can claim it.

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How to avoid mistakes

Mr Chapman urged those who weren’t sure what they could and couldn’t claim to seek out a tax agent for assistance.

“Given that our research shows that about 1 in 4 taxpayers who lodge themselves via myTax make mistakes in their return and that 64% of Aussies are unsure of the deductions they can claim, it is worthwhile getting a tax agent to prepare your return for you,” he said.

“Common mistakes highlighted by our survey include forgetting to keep receipts or records of an expense (34%), leaving out a portion of income (27%), and claiming deductions for personal expenses (27%).”

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Savings.com.au’s two cents

Having a good understanding of what expenses you can claim for and having proof of these expenses is vital at tax time.

But if you’re still not confident in lodging your return, contact the ATO or seek help from a financial adviser.

The last thing you want is to miss out on something you could’ve claimed for, or make a mistake and risk a possible fine.