Employees guide for work expenses

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What this Guide is about

This Employees guide for work expenses will help you as an employee to decide whether your expenses are deductible and what records you need to keep to substantiate them.

Not all expenses associated with your employment are deductible. This Guide explains:

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how to determine if an expense is deductible against your employment income

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how to apportion your expenses if they are only partly deductible

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how to work out whether you can claim a deduction in the year you incurred the expense or whether you need to claim a deduction for a decline in value over a number of years

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what records you need to keep.

The examples used throughout this Guide assume that the people in them are employees and not in business.

What's new in the 2023–24 income year

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Practical Compliance Guideline PCG 2024/2 Electric vehicle home charging rate – calculating electricity costs when a vehicle is charged at an employee's or individual's home was published. This Guideline allows individuals who own a zero emissions vehicle (electric vehicle) and use the logbook method to rely on the method outlined in the Guideline to calculate their home charging electricity expenses. The Guideline applies from 1 July 2022.

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Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual was published. It updates the former self-education rulings: Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses and Taxation Ruling TR 92/8 Income tax: deductibility of self-education expenses. The content in TR 2024/3 is modernised to make the principles clearer and aid readability, but the view has not changed. Content on the $250 non-deductible threshold ( section 82A of the Income Tax Assessment Act 1936 (ITAA 1936)) has been removed as it no longer applies.

More detail on changes we have made can be found at the end of each Part of this Guide.

For more information, see:

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Car expenses

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Self-education and study

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Self-education reduction in expenses

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PCG 2024/2

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TR 2024/3

Common myths about work expense deductions

There are many myths about deductions that may lead you to make an incorrect claim. Here are some of the most common.

Myth: Everyone can automatically claim $150 for clothing and laundry expenses , 5000 km under the cents per kilometre method for car expenses or $300 for work-related expenses, even if they didn't spend the money.

Fact: There is no such thing as an 'automatic' or 'standard deduction'. Substantiation exceptions provide relief from the need to keep receipts in certain circumstances. While you don't need receipts for claims under $300 for work-related expenses, $150 for laundry expenses ( note: this is for laundry expenses only and doesn't include clothing expenses) or if you are claiming 5,000 km or less for car expenses under the cents per kilometre method:

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you must have spent the money and not be reimbursed

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it must be related to earning your income, and

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you must be able to explain how you calculated your claim.

For more information, see:

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Laundry expenses

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Car expenses

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Substantiation requirements

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Exceptions and relief from substantiation requirements

Myth: I don't need a receipt, I can just use my bank or credit card statement.

Fact: To claim a tax deduction, you need to be able to show that you spent the money, what you spent it on, who the supplier was and when you paid. Bank or credit card statements alone don't have this information. The only time you don't need these details is if substantiation exceptions apply.

For more information, see:

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Substantiation requirements

Myth: I can claim makeup that contains sunscreen if I work outside.

Fact: Cosmetics are usually a private expense and the addition of sun protection doesn't make it deductible. However, it may be deductible if the primary purpose of the product is sunscreen (that is, it has a high SPF rating), the cosmetic component is incidental, and your duties require you to spend prolonged periods outdoors in the sun.

For more information, see:

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Sunscreen

Myth: I can claim my gym membership because I need to be fit for work.

Fact: Very few people can claim gym membership fees. To be eligible, your job would have to depend on you maintaining a very high level of fitness, for which you are regularly tested, for example special operations personnel in the Australian Defence Force.

For more information, see:

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Gym fees and fitness-related expenses

Myth: I can claim all my travel expenses if I add a conference or a few days' work to my holiday.

Fact: If you decide to add a conference or some work to your holiday, or a holiday to your work trip, you must apportion the travel expenses between the private and work-related components and only claim the work-related component.

For more information, see:

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Conferences, seminars and training courses

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Overnight travel expenses

Myth: I can claim my work clothes because my boss told me to wear a certain colour.

Fact: Unless your clothing is a uniform that is unique and distinct to your employer, or protective or occupation-specific clothing you are required to wear to earn your income, you won't be able to claim it. Plain clothes, like black pants, aren't deductible even if your employer told you to wear them.

For more information, see:

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Clothing expenses

Myth: I can claim my pay television, newspaper and magazine subscriptions because I need to keep up to date for work.

Fact: Subscriptions to pay television, newspapers and magazines are not ordinarily deductible. Keeping up to date on news, current affairs and other general matters usually won't have a sufficiently close connection with your employment activities to provide a basis for deducting these subscriptions. They are essentially private expenses. You can only claim deductions for subscriptions which provide knowledge and information directly relevant to your income-earning activities.

For more information, see:

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Pay television and streaming services

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Newspapers and other news services and subscriptions

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Books, periodicals and digital information services

Myth: I can claim home to work travel because I need to get to work to earn my income.

Fact: For most of us, home to work travel is a private expense. You cannot claim a deduction for private expenditure.

For more information, see:

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Transport expenses

Myth: I don't need to keep records if I use my ute for work.

Fact: If you own and use a ute with a carrying capacity of more than 1 tonne for work you can't use the cents per kilometre or logbook methods to calculate your expenses. You must keep original receipts for all of your ute expenses, and provide evidence of how you calculated your work-related use of the ute. The easiest way to demonstrate how you apportioned your usage between work and private use is to use something like a logbook.

For more information, see:

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Car expenses

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Vehicles other than cars

Myth: I've got a capped phone and internet plan, so I can claim both work and private phone calls and internet usage.

Fact: Unless you only use your phone and internet for work, you have to apportion the cost between work-related and private usage and only claim the work-related portion of your expenses.

For more information, see:

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Phones, other telecommunication devices and phone usage

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Internet expenses

Myth: I can estimate the hours I worked from home when I use the fixed rate method for claiming my working from home expenses.

Fact: To use the fixed rate method, you must keep a contemporaneous record of all the hours you worked from home over the entire income year. You cannot estimate based on the average number of days per week and hours per day you worked from home.

For more information, see:

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Working from home expenses

References