You may be able to claim deductions for work-related expenses you incurred while performing your job as an employee.
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Things to know
You incurred an expense in 2020–21 if:
- you received a bill or invoice for an expense that you were liable for (even if you paid it after 30 June 2021), or
- you did not receive a bill or invoice but you were charged and you paid for the expense.
These expenses include:
- car expenses, including fuel costs and maintenance
- travel costs
- clothing expenses
- education expenses
- union fees
- home computer and phone expenses
- tools and equipment expenses
- journals and trade magazines.
You may also be able to claim some deductions which are not work related. They are:
- interest and dividend deductions for investments
- deductions for gifts and donations
- a deduction for the cost of managing your tax affairs.
See also:
- Taxation Ruling TR 97/7 Income tax: section 8-1 – meaning of 'incurred' – timing of deductions.
- Taxation Ruling TR 2020/1 Income tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997.
Goods and services tax
If your expense includes an amount of goods and services tax (GST), the GST is part of the total expense and is therefore part of any deduction. For example, if you incurred union fees of $440 which included $40 GST, you claim a deduction for $440.
Foreign employment
If you received a PAYG payment summary – foreign employment or have foreign employment payment information shown on an income statement, then you claim deductions that you are entitled to claim in respect of that income at work-related expenses and low value pool deductions in the Deductions section, as relevant.
All foreign deductions must be converted to Australian dollars before you complete this section. For more information on how to convert your foreign deductions see Foreign exchange gains and losses or you can phone 13 28 61 to get information about the exchange rates.
Basic rules
You must have incurred the expense in 2020–21.
To claim a deduction for a work-related expense:
- you must have spent the money yourself and weren't reimbursed
- it must be directly related to earning your income
- you must have a record to prove it (usually a receipt).
The expense must not be private, domestic or capital in nature. For example, the costs of normal travel to and from work, and buying lunch each day are private expenses.
If you incurred an expense:
- that was both work-related and private or domestic in nature, you can claim a deduction only for the work-related portion of the expense.
- that was capital in nature you may be able to claim a deduction for the decline in value of the depreciating assets you acquired. See Decline in value of a depreciating asset.
- for services paid in advance, see Advance expenditure to decide what part of the expense is deductible in 2020–21.
You can't claim a deduction for an expense if:
- someone else paid the expense
- you were, or will be reimbursed for the expense, or
- the payment or reimbursement is a fringe benefit (including an exempt benefit).
If you were partially reimbursed for the expense, you can only claim the part that was not reimbursed.
Record keeping for work-related expenses
You must be able to substantiate your claims for deductions with written evidence if the total amount of deductions you are claiming is greater than $300.
- The records you keep must prove the total amount, not just the amount over $300.
- The $300 does not include car and meal allowance, award transport payments allowance and travel allowance expenses. There are special written evidence rules for these claims which are explained at the relevant sections.
If the total amount you are claiming is $300 or less, you need to be able to show how you worked out your claims, but you do not need written evidence.
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Advance expenditure
If you have prepaid an amount for a service costing $1,000 or more, and the service extends for a period of more than 12 months or beyond 30 June 2022 (such as a subscription to a journal relating to your profession), then you can claim only the portion that relates to 2020–21. You can also claim the proportion of your pre-paid expenses from a previous income year that relate to 2020–21.
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Allowances
If an allowance you received is shown on your tax return (in your income statement or payment summary details), you can claim a deduction for your expenses covered by the allowance but only if you:
- actually incurred the expenses in producing your employment income, and
- meet the basic rules discussed above.
For example, if you received a tools allowance of $500 and your tool expenses were $300:
- the whole amount of the allowance ($500) is included with your income statement or payment summary details on your tax return, and
- you claim a deduction of $300 at Other work-related expenses.
Decline in value of a depreciating asset
You may be able to claim a deduction for the decline in value of a depreciating asset which you held during 2020–21 if you used it to produce income that you show on your tax return.
A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Depreciating assets include items such as tools, reference books, computers and office furniture.
The decline in value of a depreciating asset is worked out based on its effective life. You can either make your own estimate of its effective life or use the Commissioner's effective life determinations. For assistance with both, see Taxation Ruling TR 2020/3 – Income tax: effective life of depreciating assets (applicable from 1 July 2020).
You may be able to claim an immediate deduction for the full cost of depreciating assets costing $300 or less provided certain conditions are met.
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These myTax 2021 instructions are about claiming deductions for work and non work-related expenses.