Can I claim it? What counts as a work expense when you're doing your tax return

It's easy to make mistakes when you're doing your tax return — innocent or otherwise.

Tax agents have seen clients trying to claim expenses for their pets, claiming they are "business mascots".

Or retail workers claiming they are "entertainment consultants" in an attempt to deduct expenses for video games and streaming services.

These examples point to the common misconception that expenses even tangentially related to work can be claimed at tax time. But that's not the case.

Susan Franks, senior tax advocate at Chartered Accountants Australia and New Zealand, says clothing and laundry expenses are a case in point.

"There's a fairly narrow band of types of clothes that can actually be claimed," she says.

"You can only claim deductions for clothing that you need for your work, such as steel-capped boots; or if it's a distinctive uniform, such as a chef's checked pants."

With tax return season underway, we asked Ms Franks to clear up the confusion around what you can and can't claim this year.

The golden rules of claiming an expense for work

There are three "golden rules" that apply when it comes to claiming expenses for work, Ms Franks says.

1. 1.You must have paid for it yourself. "People who have incurred an expense but have been reimbursed by that expense by their employer can't claim a deduction for that expense."
2. 2.The expense must directly relate to earning your income. "If people are looking to claim depreciation on their computer or internet or phone costs [for working from home] … they need to be very careful to divide it between private use and work use, and only claim the work component."
3. 3.You must have a record of the expense (usually a receipt). "Go through your receipts, make sure they are all in one spot so you can claim that deduction, because you have the evidence." For example, you could use the ATO's free MyDeductions app to keep track of your receipts.

'But I bought it for work!'

While you might spend money on books, magazines and subscriptions that relate to your job, that doesn't necessarily mean they are deductible.

"They do need to be related directly to your work," Ms Franks says.

"So, subscribing to updates of a technical nature for your work would certainly count, but keeping up to date on social trends is not going to be a deductible expense for most people."

The ATO uses the example of a real estate agent subscribing to a newspaper to keep across property listings.

If the property section was only included on Wednesdays and Saturdays, the agent could only make a claim for the cost of those two days — not their weekly subscription.

Some people might try to claim other expenses that they incur on the job. For example, keeping receipts for gifts or a farewell cards for their colleagues. These sorts of expenses aren't deductible, Ms Franks says.

"Unfortunately, even though it's to do with work, it's not a work-related expense, it's a private expense," she says.

The ATO has detailed occupation and industry specific guides on its website, which can help you navigate what you can and can't claim.

Working from home and your tax return

Keep in mind that the ATO has changed the rules about working from home expenses for this financial year.

There are now two ways you can claim a deduction:

The fixed-rate method of 67 cents per hour

This covers energy expenses, phone use, internet, stationery and computer consumables (such as software).

Ms Franks says it's a "nice, shorthand" way of calculating expenses. But it means you can't make a separate claim for your phone and internet, for example.

"I think a lot of people may make that mistake this year, if they're not aware of the … components of that 67 cents," she says.

The actual cost method

If you don't use the fixed rate, you can claim the work-related portion of your actual running expenses.

You'll need to keep a detailed record of all the expenses you've incurred and notes of how you've calculated the work-related portion.

Keep in mind that both methods require detailed records of the hours you've worked at home. Unfortunately, it's not straightforward.

If you're using the actual cost method, you can either use the actual hours worked or base your deduction on a representative four-week period recorded in a diary.

If you use the fixed-rate method, you can only use the diary method to cover the period to July 1, 2022, to February 28, 2023. From March 1, 2023, you'll need to have a record of the actual hours worked from home.

Last but not least, Ms Franks says don't forget to claim other deductible expenses, such as union fees and donations to charities and organisations eligible for tax deductions.