Tax Returns: What you Can and Can’t Claim.


Tax season is upon us, and at Bartons Chartered Accountants and Wealth Advisors, we’re dedicated to ensuring our clients are fully equipped to navigate the complexities of their tax returns. Last year, the Australian Taxation Office (ATO) pinpointed several areas of focus, and we’re here to break them down for you.

Rental Property Deductions: A Closer Look

The ATO reports that 90% of rental property owners have inaccuracies in their tax submissions. These errors range from not reporting all rental income to claiming ineligible deductions. It’s imperative to understand that you can only claim interest on loans if the borrowed funds were used to buy properties that generate rental income.

One common area of confusion for property owners during tax time is distinguishing between maintenance-related expenses and those that are capital in nature. It’s crucial to get this right, as it has significant tax implications.

  • Repairs vs. Replacements: Know the Difference
    A simple repair, such as fixing a leaking tap by calling a plumber, is likely to be considered a maintenance expense. This cost is typically deductible in the year it’s incurred. However, if the plumber replaces the entire tap, it may be classified as a capital expense. This replacement could be considered a depreciable asset and must be claimed over several years.
  • Long-Term Capital Improvements
    More extensive work, like addressing leaking pipes within your walls, falls into a different category. These are long-term capital improvements, which are depreciated over a longer period, typically 40 years. While the distinctions may seem minor, they can have substantial tax ramifications.

Home Office Deductions: Understanding the Changes

The shift to remote work has brought about new considerations for home office deductions. The ATO offers two methods for calculating these expenses: the actual cost method and the fixed rate method. Each has its own set of requirements for record-keeping and eligible expenses.

  • The Fixed Rate Method simplifies the process by allowing you to claim a standard rate of 67 cents per hour for each hour you work from home. This rate covers additional costs such as electricity, heating, cooling, and the decline in value of office furniture. It’s a straightforward approach that requires less detailed record-keeping, making it a convenient option for many.
  • The Actual Cost Method requires a more meticulous approach, as it involves calculating the actual expenses incurred while working from home. This includes keeping detailed records and receipts for all work-related expenses, such as utility bills, home office equipment, and phone and internet expenses. While this method demands more effort in documentation, it can result in a larger deduction if your actual expenses are higher than the standard fixed rate. It’s ideal for those who have a dedicated home office and incur significant work-related costs.

With the rise of remote work, many medical professionals find themselves partially working from home. You may be able to claim tax deductions for additional running expenses related to your home office. These could include:

  • Heating, cooling, and lighting: If you’re using your home office space, a portion of your utility bills can be claimed.
  • Depreciation of office equipment and furniture: If you’ve purchased office furniture or equipment (such as a desk, chair, or computer), you can claim the decline in value over time.
  • Phone and internet expenses: A portion of your phone and internet bills related to work can be deducted.
  • Computer consumables: Expenses for paper, ink, and other consumables used for work purposes are eligible for deduction.

Capital Gains Tax: Selling an Asset

When disposing of assets like shares, cryptocurrencies, or properties, individuals may incur Capital Gains Tax (CGT). CGT is a tax on the profit made from selling these assets and is calculated by subtracting the cost involved in acquiring and maintaining them from the final sale price. It’s essential to report any capital gains or losses in your tax return, as failing to do so can lead to penalties.

  • Enhanced Data Matching Capabilities
    The ATO has significantly enhanced its data matching capabilities, allowing for more efficient and accurate tracking of financial transactions related to assets. This advancement aids the ATO in identifying discrepancies between reported income and actual financial activities.
  • Generating Income from your Home
    Maintaining proper documentation is vital, especially when using your home to generate income, which may affect your eligibility for the main residence exemption from CGT. Records should include details of the income-producing period and the portion of the property used to produce income. These records are crucial for accurately calculating any capital gain or loss and ensuring that you claim the correct exemption or concession available under tax law.

Tips for Maintaining Records

As we embrace the digital age, we’ve said goodbye to the old ‘shoebox’ method and welcomed a more streamlined, digital approach. However, the essence of organisation—filing and sorting—remains unchanged. Importantly, maintaining tax invoices is essential, as bank statements alone won’t be considered acceptable by the ATO case of an audit. The best practice is to be proactive: file your tax invoices immediately after a purchase, which is far simpler when compared to a last-minute scramble. By digitising your records, you’re not just keeping up with the times; you’re setting yourself up for success with a tidy, accessible, and audit-ready system.

Other Potential Deductions

  • Professional Development and Conferences: Attending conferences, seminars, and professional development programs is essential for staying up to date in the medical field. You can claim expenses related to these events, including registration fees, travel costs, accommodation, and meals.
  • Exams and Further Study: If you’re pursuing additional qualifications or certifications, expenses related to exams, study materials, and course fees can be claimed. Whether it’s board exams, specialty certifications, or ongoing education, ensure you keep receipts and relevant documentation.
  • Income Protection: There are distinct considerations when claiming income protection insurance premiums. Previously, a taxpayer would claim the entirety of the premium; however, this practice has been revised. Insurers now issue a tax statement, which is the critical document required. This statement delineates deductible and non-deductible amounts. For context, should you make a claim on your policy, some of the potential benefits are received tax free – the lowering of the deductible amount is designed to reflect this.

How can Bartons help?

Tax return assistance is a key area of speciality. Additionally, we offer the exclusive Bartons Black program, tailored specifically for our younger medical doctors. This program is highly digitalised, offering the convenience of scheduling appointments online and conducting consultations via Zoom or Teams. We also feature a detailed online medical checklist, which outlines nearly every possible deduction you can be claimed. Our clients greatly appreciate this feature, especially given the busy schedules that many medical professionals manage.