Work-Related Tax Deductions: Complete Guide

The three golden rules of deductions

Before you claim anything, every work-related deduction must satisfy all three of the ATO's rules:

1. You must have spent the money yourself and not been reimbursed by your employer.
2. The expense must directly relate to earning your income — it cannot be private, domestic, or capital in nature.
3. You must have a record to prove it — usually a receipt, invoice, or diary entry.

If an expense is for both work and personal use (like a phone or laptop), you can only claim the work-related portion. You need records that show how you calculated the split.

Working from home expenses

If you work from home to fulfil your employment duties (not just checking emails occasionally), you can claim the additional running costs you incur. There are two methods:

Fixed rate method — 70 cents per hour

From 2024-25, the ATO's fixed rate is 70 cents per hour worked from home. This single rate covers:

• Electricity and gas for heating/cooling and lighting
• Phone usage (mobile and home)
• Internet
• Stationery and computer consumables (ink, paper, toner)

You cannot separately claim phone, internet, or energy costs if you use this method — they're already covered. But you can still claim depreciation on office furniture and equipment (desks, chairs, monitors) on top of the fixed rate.

Actual cost method

Alternatively, you can calculate and claim the actual work-related portion of each running cost individually. This requires more paperwork but can produce a larger deduction, especially if your home office costs are high (e.g., you have a dedicated room with high energy costs).

You must keep all receipts and bills, record your actual hours, and maintain a continuous 4-week diary showing your usual working pattern. This diary establishes the percentage you apply to the full year.

Car and travel expenses

You can claim car expenses for work-related travel — but not your daily commute. Driving between home and your regular workplace is a private expense for most employees.

What trips can you claim?

• Travel between two separate workplaces (e.g., your main job and a second job)
• Travel to an alternate work location (client sites, conferences)
• Travel to attend work-related training or education
• Carrying bulky tools or equipment when no secure storage is available at your workplace
• Itinerant workers who regularly work at multiple locations during a single day

Cents per kilometre method — 88 cents per km

The simplest method. From 2024-25, the rate is 88 cents per kilometre, capped at 5,000 work-related kilometres per car per year. That's a maximum deduction of $4,400.

You don't need fuel receipts, but you do need to be able to show how you calculated your work-related kilometres — for example, a diary of work trips or a reasonable estimate based on regular routes.

Logbook method

If you drive more than 5,000 work km or want to claim a higher percentage, you can keep a logbook. This requires:

• A 12-week continuous logbook recording every trip (work and private), with odometer readings
• Odometer readings at the start and end of the financial year
• Receipts for all car expenses (fuel, insurance, rego, servicing, etc.)

A valid logbook lasts 5 years unless your circumstances change significantly (e.g., new job, new home address). There is no 5,000 km cap with the logbook method — you claim the actual business-use percentage of all car costs.

Clothing, laundry and uniforms

This is one of the most commonly misunderstood deductions. You cannot claim conventional clothing — even if your employer tells you to wear a specific colour, and even if you only wear it to work.

What you can claim

• Compulsory uniforms — must be a uniform that identifies you as an employee, strictly enforced through a workplace agreement or policy
• Non-compulsory uniforms — only if the design is registered on the ATO's Register of Approved Occupational Clothing
• Occupation-specific clothing — clothing that distinctly identifies your occupation (chef's checked pants, nurse's scrubs, barristers' robes)
• Protective clothing — steel-capped boots, hi-vis vests, hard hats, safety glasses, fire-resistant clothing, sun protection gear (long-sleeved shirts, broad-brimmed hats), non-slip shoes, heavy duty overalls

What you cannot claim

• Plain black pants, white shirts, or similar conventional clothing
• Clothes purchased because your boss told you to wear a certain colour
• Suits, business attire, or "smart casual" clothing — even if you only wear them to work

Laundry rates

If your total laundry claim is $150 or less, you don't need written evidence. Above $150, you need receipts. Dry-cleaning receipts are always required regardless of the amount.

Phone and internet expenses

If you use your personal phone or home internet for work, you can claim the work-related percentage. But not if you already use the working from home fixed rate method — phone and internet are included in the 70c/hour rate.

Calculating your work-use percentage

• Incidental use (under $50) — if your work use is minor, you can claim up to $50 with basic records only
• 4-week diary method — keep a record of all phone/internet use for a continuous 4-week period, calculate the work percentage, and apply it to the full year
• Actual records — detailed records of every work-related call or data usage for the entire year

Tools, equipment and technology

Tools, computers, software, and equipment used for work can be deducted — but whether you claim them immediately or over time depends on the cost.

The $300 threshold

• $300 or less: Claim an immediate deduction in the year of purchase — as long as you use the item mainly (more than 50%) for work, and it isn't part of a set that together costs more than $300
• Over $300: You must depreciate the item over its effective life. For example, a $1,500 laptop with a 4-year effective life gives you $375 per year in deductions

Common depreciation periods (ATO effective life)

If you use an item for both work and personal purposes, only claim the work-related percentage. For example, if you use your laptop 60% for work and 40% for personal use, you can only claim 60% of the cost or depreciation.

Self-education expenses

You can claim self-education expenses if the course directly relates to your current job — not a future career you haven't started. The education must either:

• Maintain or improve specific skills or knowledge required for your current work, or
• Be likely to result in an increase in your income from your current employment

What you can claim

• Course and tuition fees (including fees paid via FEE-HELP — but not the HELP repayment itself)
• Textbooks, professional journals, and academic papers
• Stationery
• Student union and amenities fees
• Depreciation on a computer used for study (apportioned for private use)
• Travel to attend courses (home to education to work, or work to education to home)
• Accommodation and meals if overnight travel is required
• Internet usage for study purposes

What you cannot claim

• Courses for a new career you haven't started yet
• Courses only generally related to your job
• HECS-HELP or FEE-HELP compulsory repayments (these are paid through the tax system)
• Government assistance payments (Austudy, ABSTUDY, Youth Allowance)

Other common deductions

Union and professional association fees

Membership fees for trade unions, professional associations, and registration fees required for your work are deductible.

Income protection insurance

Premiums for income protection insurance (also called salary continuance) are deductible if the policy pays a regular income stream while you're unable to work. Life insurance and trauma/critical illness cover are not deductible.

Tax agent fees

The cost of having your tax return prepared by a registered tax agent is deductible in the year you pay it — including travel to and from your agent's office.

Donations

Gifts and donations of $2 or more to registered deductible gift recipients (DGRs) are deductible. The organisation must be endorsed as a DGR by the ATO — you can check on the Australian Business Register.

Working from home office furniture

Items like desks, chairs, monitors, and keyboard/mouse setups used for work can be claimed. Items $300 or less are immediately deductible. Items over $300 are depreciated. This is separate from the WFH fixed rate method — you can claim furniture depreciation on top of the 70c/hour rate.

Record-keeping requirements

The $300 substantiation threshold

If your total work-related expense claim is $300 or less, you need records showing how you calculated your claim (a diary or spreadsheet is fine), but you don't need formal written evidence like receipts.

If your total exceeds $300, you need written evidence for every expense — not just the amount over $300. A bank or credit card statement alone is not sufficient.

How long to keep records

Keep all records for 5 years from the date you lodge your tax return. Digital records are acceptable — photos of receipts and scanned documents are fine as long as they are a clear and true copy of the original.

The ATO myDeductions app

The ATO's free myDeductions tool (inside the ATO app) lets you photograph and categorise receipts throughout the year. At tax time, you can upload the data directly to your tax return or share it with your tax agent. If you're going to track deductions seriously, it's worth setting up at the start of the financial year rather than scrambling for receipts in June.

Common mistakes the ATO flags

Every tax time, the ATO publicly announces its focus areas. These are the claims that most commonly get people into trouble:

1. Claiming the commute. Travel between home and your regular workplace is private. The exception for "bulky tools" only applies if there's genuinely no secure storage at your workplace — a locker or shared storage room typically rules this out.
2. Claiming plain work clothes. A black shirt your boss told you to buy is not a uniform, not occupation-specific, and not protective. It's conventional clothing and not deductible.
3. Claiming working from home without actually working. You must be fulfilling your employment duties — occasionally checking email or being available on your phone doesn't count. You must also have incurred additional running costs.
4. Copy-pasting last year's claims. The ATO uses data matching and flags claims that look identical year after year without genuine basis. Your actual expenses may change each year.
5. Gym and fitness costs. Very few people can claim gym membership. Being generally fit for your role is not enough — the requirement must be specific and mandatory (like armed services fitness testing).
6. Claiming without receipts over the $300 threshold. "I didn't keep receipts" is not a defence. If your total claims exceed $300, you need written evidence for every item — not just the amount above $300.
7. Claiming personal portions. If you use a phone 30% for work, you claim 30% — not 100%. The ATO expects a reasonable basis for your percentage split, such as a 4-week usage diary.

How deductions actually save you tax

A common misconception is that a $1,000 deduction saves you $1,000 in tax. It doesn't. A deduction reduces your taxable income, so the tax saving depends on your marginal tax rate:

Plus, deductions also reduce your Medicare Levy (2%), so you save an extra $20 per $1,000 in deductions on top of the income tax saving.

Quick reference: key rates for 2025-26