Australians claim around $20 billion in tax deductions annually.

That works out at around $2,000 per taxpayer.

Are you claiming all you can?

Tax evasion is of course illegal, but you are entitled to avoid paying more than you must.

Maximising deductions

The basic principle is that, if you need to spend money to earn income, you can usually claim it. The overall rules for expenses are that you:

  • must claim the deduction in the same income year that you made the purchase
  • can’t claim an expense that has been, or will be, reimbursed (whoever reimburses you will claim the expense)
  • may have to prove your claims with written evidence so keep receipts for everything.

Depending on what you do for a living, you may be able to claim deductions for; vehicle and travel expenses, clothing and laundry expenses, donations, home office expenses, interest, dividend and other investment related expenses, self-education expenses, or tools and equipment.

The ATO provides 38 different guides for specific deductions allowed for workers in different industries. We don’t usually do this, and it’s a long list but we provide links to every one of these guides at the bottom of this article.

Prepay insurances and interest. If you have borrowings and insurances that are required to earn income (for an investment property or margin loans, for example) you may be able to prepay up to 12 months worth, claiming an immediate deduction in the current financial year.

If you pay income protection insurance premiums annually in advance before 30 June, you can claim the deduction in the current year.

If you have received offsets for net medical expenses in prior years, you can continue to claim net medical expenses in the 2015 tax year. Net out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses are claimable until 1 July 2019.

Reducing taxable income

There are precious few legal things you can do to reduce the income side of the equation but one way the government positively encourages is to contribute to superannuation. If you are under 50, you can contribute up to $25,000 per year (or $50,000 if you are older) from pre-tax income. Your super fund will then be taxed at only 15%.

As a bonus, the government will co-contribute up to another $1,000 to your super account for you.

If you are a freelancer or self-employed, you may be able to delay invoicing clients until after June 30, pushing some income into the next financial year.

What next?

Dreading the paper shuffling? Have a look at Making tax time as painless as possible.

What are your thoughts?

Do you think you might be missing out on deductions? Is there anything else you’d like to know about managing tax?

Join the conversation — leave a comment below and let us know what you’re thoughts are.

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Okay, so as promised here’s that list of ATO tax deduction guides…


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