Nick Bruining: How the new $1000 work-related tax deduction works

Details have been released covering how the new $1000 tax deduction for work-related expenses will work when it starts on July 1.

Expected to affect more than six million taxpayers, the increased amount applies for the new financial year, so you can’t use it for this year’s tax return.

Taxpayers can, however, use the same principles for the current lower amount of $300 of work-related expenses.

Tax deductions are typically those expenses associated with generating tax-assessable income, but can also apply to specific expenses including donations to registered charities and concessional payments to superannuation.

In order to validate the expense and to prove a link to the generation of assessable income, taxpayers must normally provide proof of the actual expense. Usually, that’s done through an invoice and/or a receipt showing the item or service and the amount paid.

Where the item can be used for private purposes as well, and is not unique to your occupation, the Australian Taxation Office often disallows that as a deduction.

For example, a person wearing a suit to work can’t claim the cost of the outfit as a deductible expense. A suit is regarded as a normal item of clothing, with the ATO only allowing clothing that is unique to your occupation and “not suitable for everyday wear”.

Uniforms and protective clothing, however, usually can be tax-deductible.

Under the new rules, you won’t need to provide any proof of tax-deductible work-related expenses up to a total maximum of $1000 in value. In reality, many taxpayers will simply tick the box, on whether or not they incurred the expense.

The new deduction is expected to boost the average taxpayer’s refund or reduce their tax debt by about $205.

Treasurer Jim Chalmers said taxpayers claiming more than $1000 in work-related deductions would still be able to do so, but proof would be required.

“Charitable donations and other non-work related deductions would continue to be claimed on top of the instant tax deduction, as will union or other trade business or professional association memberships,” Dr Chalmers said.

Similar principles apply now, but only up to a maximum of $300.

Taxpayers who choose to do their own tax return via the my.gov.au portal are usually prompted with suggested and possible work-related deductions once they load their occupation into the system.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association