Tax Deductions Basics Australia 2025: What You Can Claim

Tax deductions reduce your taxable income, which means you pay less tax. Understanding what you can claim is the key to maximising your tax refund - legally.

How Deductions Work

A deduction reduces your taxable income - it's not a dollar-for-dollar refund.

• Claim $1,000 in deductions at 32.5% tax rate
• Your tax is reduced by $325
• Your refund increases by $325

The 3 Golden Rules
Work-Related Deductions
Working From Home
Car and Travel
Uniforms and Clothing
Self-Education
What You Cannot Claim
Record Keeping

The 3 Golden Rules of Tax Deductions

For any expense to be tax deductible, it must meet all three of these conditions:

Work Related

The expense must be directly related to earning your income

You Paid For It

You personally spent the money and weren't reimbursed

You Have Records

You can prove the expense with receipts or other documentation

The $300 Rule

You can claim up to $300 total in work-related expenses without receipts. But you still need to have actually spent the money, and it must be genuinely work-related. Above $300 in any category, you need receipts.

The most common deductions are for expenses you incur as part of your job:

Tools and Equipment

Item Cost	How to Claim
$300 or less	Claim the full amount immediately
Over $300	Depreciate over the item's effective life

Examples of Claimable Tools

Laptop or computer (work use percentage)
Mobile phone (work use percentage)
Specialised software
Trade tools and equipment
Briefcases and bags used for work

Phone and Internet

You can claim the work-related percentage of your phone and internet bills.

Calculating Work Use

Keep a 4-week diary tracking work vs personal use, then apply that percentage to your bills for the year.

Example: Phone bill $100/month, 30% work use = $30/month deductible = $360/year

Union Fees and Professional Memberships

Union membership fees - 100% deductible
Professional association fees (if required for work)
Registration fees for licensed occupations
Working with children check fees

Working From Home Deductions

If you work from home, you can claim a portion of your home office expenses. There are two methods:

Method 1: Fixed Rate (Recommended for Most)

67 cents per hour worked from home

This covers:

• Energy expenses (electricity and gas)
• Phone and internet
• Computer consumables
• Stationery

You need: A record of actual hours worked from home (time sheets, diary, roster)

Fixed Rate Example

Work from home 3 days/week = ~15 hours/week
48 working weeks per year = 720 hours
720 hours x $0.67 = $482.40 deduction

Method 2: Actual Expenses

Calculate the actual costs and work-related percentage. More complex but may give higher deductions.

Calculate work use percentage of your home (square metres)
Apply that percentage to electricity, internet, etc.
Requires detailed records and calculations
Cannot double-dip (e.g., claim phone separately if using fixed rate)

Office Equipment

Items like desks, chairs, and monitors are claimable separately under both methods:

Under $300: Claim full amount in the year of purchase
Over $300: Depreciate over the item's effective life
Work use percentage applies if also used personally

Car and Travel Deductions

Important: Home to Work is NOT Deductible

Travelling from home to your regular workplace and back is private, not work-related. You cannot claim this commute.

When Car Travel IS Claimable

Travel between two different workplaces
Travel to meet clients or attend meetings
Carrying bulky tools you can't store at work
Required to start work at different locations each day
On-call travel from home to work site

Cents Per Kilometre Method

85 cents per kilometre (2024-25)

This method is simple and covers all car running costs:

• Maximum 5,000 km per year
• Maximum claim: 5,000 x $0.85 = $4,250
• Need to be able to show how you calculated km
• Keep a reasonable record (diary, log)

Logbook Method

For claiming more than 5,000 km or if actual costs are higher:

Keep a logbook for a continuous 12-week period
Record every trip (date, km, purpose)
Calculate work use percentage
Apply percentage to actual car costs (fuel, rego, insurance, repairs)
Logbook valid for 5 years (if circumstances don't change)

Uniforms and Clothing

What You CAN Claim

Compulsory uniforms - Required by your employer, with company logo
Protective clothing - Steel-cap boots, high-vis, safety glasses
Occupation-specific clothing - Chef whites, nurse scrubs, theatrical costumes
Registered logos - Uniform registered with AusIndustry

What You CANNOT Claim

Conventional clothing (even if only worn for work)
Plain black pants/white shirts for dress codes
Suits, dresses, shoes (unless protective)
Clothing you could wear outside work

Laundry and Dry Cleaning

Laundry Claim

• $1 per load if only work clothing
• $0.50 per load if mixed with personal items
• No receipts needed under $150 total
• Dry cleaning requires receipts

Self-Education Expenses

You can claim self-education if it's directly related to your current job and either:

Maintains or improves skills for your current work, OR
Is likely to increase your income from current employment

Claimable Self-Education Costs

Course fees and textbooks
Stationery and equipment
Travel to attend classes
Home office expenses while studying
Internet for online courses

What's NOT Claimable

Study that leads to a new career or promotion to a different role is not deductible. For example, a nurse can't claim costs for a law degree, but can claim costs for advanced nursing qualifications.

What You Cannot Claim

These common expenses are NOT tax deductible:

Never Deductible

x Home to work travel (commuting)
x Childcare and school fees
x Conventional clothing
x Private health insurance premiums
x Meals at work (normal circumstances)
x Parking at work

Only Partially/Sometimes Deductible

! Phone (work percentage only)
! Internet (work percentage only)
! Computer (work percentage only)
! Travel with private component
! Entertainment (limited circumstances)

Record Keeping Requirements

The ATO can audit your tax return and ask for proof of deductions. Keep records for 5 years from the date you lodge.

What to Keep

Receipts - For all purchases over $300 (per category)
Bank statements - Showing the payment was made
Logbooks - For car or home office use
Diaries - Recording work use of phone, internet, etc.
Invoices - From service providers

The myDeductions App

Free ATO App

Download the ATO's myDeductions app to:

• Photo and store receipts
• Track car trips
• Record work-related expenses
• Export directly to your tax return

Audit Risk

The ATO uses data matching to identify unusual claims. If your deductions are significantly higher than others in your occupation and income bracket, you may be selected for review. Always claim only what you're entitled to and can prove.

Related Calculators & Resources

Income Tax Calculator

See how deductions affect your tax.

First Tax Return Guide

Step-by-step guide to lodging.

WFH Deductions Guide

Detailed working from home claims.

Deductions by Profession

Industry-specific deduction guides.

Key Takeaways

✓ Deductions must be work-related, paid by you, and have records
✓ Working from home: claim 67 cents per hour (fixed rate method)
✓ Car travel: 85 cents per km (max 5,000 km) or logbook method
✓ Home to work commuting is NOT deductible
✓ Keep receipts for 5 years - use the myDeductions app
✓ Only claim what you actually spent and can prove

Disclaimer: This guide provides general information about tax deductions in Australia for the 2024-25 financial year. Deduction rules can be complex and depend on individual circumstances. For specific advice, consult a registered tax agent or the Australian Taxation Office. This content is for informational purposes only and should not be considered tax advice.