By Mark Chapman, Director of Tax Communications at H&R Block.
It’s nearly the end of the tax year and that can only mean one thing; it’s almost time to lodge your tax return.
Sure, it can be a stressful and time consuming chore to get all your receipts together, even more so if you then choose to lodge your return yourself rather than using an accountant, but the chances are at the end of it, you’ll get a nice refund cheque back from the ATO to spend on your next holiday or to pay down your debt.
The key to maximising that refund is to make sure you’re claiming all the deductions you’re entitled to. Most of those will relate to things you’ve purchased as part of your job or your business. The general rule is that if a purchase is made to enable you to earn income or to operate your business, you can claim a deduction. Some of those deductions will be obvious but some of them could be just a bit unusual….
Dogs: Can you seriously claim a tax deduction for your pet pooch? Well, probably not. But there are circumstances where a deductible dog could be a real possibility. If your business uses a guard dog to keep your premises secure, a dog is indeed deductible. It’s regarded as a capital asset of the business and you can claim an immediate deduction for the whole cost using the very generous temporary full expensing tax break. Obviously, it needs to be a dog suitable for the purpose; a poodle is unlikely to cut it. The same logic applies to dogs used on a farm, such as a sheep dog.
Sex Toys: It’s well established that you can claim a deduction for the tools you use in your trade. But depending on what your trade is, your tools could be very different to the hammers, spanners and drills usually claimed. If you work in the adult industry, you could be looking at a deduction for sex toys, lube and all manner of “accessories”. You can only claim the business use element of course; if you use them in your personal activities, forget the tax deduction. If you’re an exotic dancer, you could even consider a deduction for fake breasts; whilst we’re not aware of anybody making such a claim here in Australia, it’s been successfully done in the USA and there’s no reason in principle why it couldn’t be done under our law. Expect an awkward conversation with the ATO if you try it though.
Performance Tools: If you’re a professional performer (actor, musician, dancer, magician, circus performer, etc), there are all manner of strange deductions which you might look at claiming. Mime lessons? Absolutely. The cost of ceremonial swords? Certainly, if you’re a professional sword swallower. Acting classes, dance classes, musical instruments, magic tricks….if you make a living from stage or screen, a whole world of odd and interesting claims opens up to you.
Works of Art: Most offices these days have an array of pretty pictures dotted about the place, often in customer focussed spaces like reception areas and meeting rooms. Using the temporary full expensing tax break, you could be looking at an immediate tax deduction for your business for that fine canvas you’ve had your eye on. Just make sure it really is used in your business. If the ATO finds out that the picture you claimed was in your office reception area is really hanging in your lounge room at home, your business will lose the deduction and end up paying more tax plus some interest and penalties!
Garden Gnomes: Do you own a rental property? In amongst the usual deductions – mortgage interest, rates, repairs, etc – did you know that you can claim for items that improve your property’s ‘street appeal’? Whether you think garden gnomes do that or not is really a matter of personal taste but several clients have successfully claimed them in respect of their rental property. Here’s a tip – make sure the gnomes are actually for your rental property; if they turn up in the garden of your family home, they are not deductible!
Pool tables, ping-pong tables, x-box consoles and TV sets. Again, provided they are used in a business context (perhaps as part of a communal recreation room in a factory or office), they should be deductible. If you just plan to put them in your own rumpus room at home however, forget it!
The key to claiming any tax deduction is to keep records such as invoices, receipts and bank statements. If you are claiming something unusual, expect to be challenged by the ATO but if the way you earn your assessable income is aligned with the items you’ve claimed a deduction for, you should be OK, no matter how strange it is. And one final piece of advice; if in doubt about what you can claim, talk to a tax adviser, at H&R Block, who’ll be able to give you specific guidance on your situation.