Myths are everywhere. They’re in culture, folklore, homes, offices, and even in our taxes. The Australian tax system is constantly evolving with amendments and updates. And while many changes are for the good, it can get confusing at times causing myths and wrong notions to come about.
Misinformation is dangerous business. Even the smallest misconceptions can bring significant problems. That’s why it’s important to always build clarity, most especially in the area of taxation and finances. Thankfully, the ATO has come out with an update debunking the most common tax myths and bringing clarity in these matters.
Here are the top ten Australian tax myths people believe and areas of clarity that will hopefully guide Australian taxpayers better.
Myth #1. $150 for clothing and laundry, 5000 kilometres for car related expenses and $300 for work-related expenses are available to everyone.
Fact: The recordkeeping exemptions applies in the above mentioned circumstances. However, it doesn’t mean everyone is automatically entitled with the deduction. The money must be spent in order to produce income and the ATO may request explanation of how you worked the amount out.
Myth #2. I don’t need receipts, just bank or credit card statements
Fact: To get a tax deduction, your proof of purchase needs to show what you spent it on, who the supplier was, and when the purchase occurred. Unfortunately, bank and credit card statements don’t contain this information. However, there can be cases where record-keeping exceptions apply. But for majority of the time, receipts are necessary.
Myth #3. I can claim makeup with sunscreen if I work outdoors
Fact: We all want to look great when we’re at work, but having sunscreen in makeup doesn’t automatically make it deductible. It may be deductible, however, if the primary purpose of the product is sunscreen, the cosmetic component is incidental, and you were required to wear it.
Myth #4. Gym membership can be claimed
Fact: Some people think that because fitness is important to working effectively that it can be claimed. Fitness is important, but claiming gym memberships is only limited to a few jobs requiring high level of fitness such as being part of the Australian Defence Force.
Myth #5. I can claim all expenses of a work plus vacation trip
Fact: If you’re claiming expenses on a business trip, expenses of work-related and vacation-related activities need to be separated and apportioned.
Myth #6. I can claim all work clothes
Fact: Unless your work clothing falls under the category of company uniform, it cannot be claimed. Plain clothes specified by your boss cannot be claimed even if it’s company required.
Myth #7. Netflix or Foxtel subscriptions used for work can be claimed
Fact: Subscriptions to entertainment platforms such as Netflix and Foxtel can be claimed as expenses, but only fully when used solely for work purposes. If it’s used for personal and work, then claims must be apportioned. You will also need to show a strong correlation between your income and the subscription.
Myth #8. Home-to-work travel can be claimed
Fact: Since we are paid by the company to work and not to get to work, most people cannot claim home-to-work travel. There are however special exceptions such as when an employee needs to carry heavy equipment from his or her home to work.
Myth #9. Both personal and private phone calls can be claimed
Fact: Just like all benefits already stated above, phone plans need to be apportioned accordingly. Cost on personal phone calls cannot be claimed and must be separated. It is recommended that work phones be used solely for work purposes for simplicity.
Myth #10. My tax agent is responsible for my claims
Fact: Even when you use a tax agent, the responsibility of providing the necessary information and documents falls ultimately the taxpayer. So make sure to provide accurate information to your agent.
If anytime you feel that you need help with your tax claims or any tax needs, we’re always here to help. Feel free to reach out to us! We’ll make ourselves available to bring more clarity in any area regarding taxing, grants or even business development.