As an employee, can you claim tea and coffee you use at home or what about that new chair bought for the home office?
These are just some of the many questions employees ask when it comes to tax time, and they are the areas people trip upon, according to expert accountants.
Chartered Accountants Australia and New Zealand (CA ANZ) senior tax advocate Susan Franks said travel expenses might also be an area that could trip up employees this year given so many people are working from home. "Travel between home and your office or client is generally treated as private, and the fact that COVID has meant that you need to work from home has not changed this position," Susan said.
Another area people often make mistakes with when it comes to tax time is claiming expenses related to private use. "You cannot claim deductions for expenses that relate to private use," said Susan. "Common examples of expenses that the ATO have highlighted as being private and thus not deductible include tea and coffee and costs relating to your child's online learning.
"Much has been in the papers about how businesses can fully expense (deduct) the cost of depreciable plant and equipment under various stimulus measures announced by the government. But that is for business, not employees.
"Employees can only deduct the cost of depreciable plant and equipment (for example, an office chair to help you work from home); you are only able to deduct the full cost this year if it is less than $300. If it is more than $300, you will have to depreciate it."
The ATO has found that the most common errors made by employees in their tax return relate to:
- claiming deductions when no money was spent;
- claiming deductions for private expenses;
- not correctly apportioning expenses between work-related and private purposes;
- not having records to prove the claim.
The ATO has a wealth of information available on its website ato.gov.au to help people understand what they can claim as an employee and what tax they should be paying. Employees need to lodge a tax return at the end of the year, and they may receive a refund after claiming any deductible expenses they are entitled to.
Income tax is paid on money you receive like salary and wages as well as profits from selling shares or property, Centrelink payments, investment income from rent, interest and dividends. You may be able to reduce the amount of tax you pay by claiming certain deductions that are directly related to earning your income.
According to the ATO to claim a work-related deduction:
- you must have spent the money yourself and weren't reimbursed;
- it must directly relate to earning your income;
- you must have a record to prove it.
Elinor Kasapidis, CPA Australia's senior manager tax policy, said don't forget about your "side hustles" when doing your taxes in 2021.
"When you declare your income, don't forget to include earnings from what we call side hustles," she said. "These are things you might be doing to earn extra money, like Uber or Airtasker. The ATO's data matching capabilities are sophisticated, and they're aware of these side gigs." Elinor said claiming deductions for workplace expenses was the most significant area that people get wrong when doing their taxes.