Work related items

The 1997 Act has a general section (s.8—1) that deals with amounts that can be deducted from assessable income. You can deduct from your assessable income any loss or outgoing to the extent that:

it is incurred in gaining or producing your assessable income, or
it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income

However, you cannot deduct a loss or outgoing under this section to the extent that:

it is a loss or outgoing of capital, or of a capital nature, or
it is a loss or outgoing of a private or domestic nature, or
it is incurred in relation to producing your exempt income, or
a provision of this Act prevents you from deducting it.

There are a number of items that wage and salary earners can claim under this section, not all of which are mentioned (or fully explained) in TaxPack. They include:

car expenses (there are detailed record- keeping requirements, set out in TaxPack)
trade union fees
accident insurance premiums, where the policy is for a regular payment in lieu of wages. Premiums are deductible. Money received under the policy is assessable income
self-education expenses. The first $250 is not deductible
computers. Three to four years is an acceptable depreciation period
books and journals. Books costing $300 or less can be claimed for in the year of acquisition. The value of books costing more than this must be added to business assets and then depreciated. Subscriptions to professional and trade journals are fully deductible
software. Software up to $300 a unit is fully deductible in the year of acquisition. Other software must be depreciated over 2.5 years
home office expenses, limited to such expenses as electricity and depreciation on furniture. There is no deduction for mortgage interest
professional libraries, which may be depreciated at 10% or 15% annually, depending on which method is chosen
special clothing and the costs of laundering it. In general it must not be adapted for ‘domestic’ purposes or social use
travelling expenses between two jobs or in the course of employment (to the extent that these expenses are not reimbursed by the employer). Records should be kept of kilometres travelled and of expenses
tools of trade. It may be necessary to depreciate major items annually rather than claim the full cost in the year they are acquired.

Depreciation rates

The depreciation rate for depreciable assets is determined by the taxpayer, who has to make a judgment about the asset’s effective life. The rates mentioned above are the ‘safe harbour’ rates — the rates that the ATO accepts as reasonable without further inquiry.

Self-education expenses

The first $250 of self-education expenses is not deductible partly for historical reasons. Formerly it gave rise to a rebate and was therefore excluded as a deduction. When the rebate was abolished, the prohibition on deducting the first $250 remained.

If you spend $250 on non-deductible self-education expenses, however, that takes you to the deductibility threshold. So if you spend $250 on tango lessons at a ‘place of education’ (and you are not a professional dancer), anything you then spend on work-related self- education becomes deductible.

You must establish a sufficiently close connection between the expenses and the employment. Generally, any expenditure directed towards maintaining or updating taxpayers’ skills in a particular occupation will be deductible.