The Australian Taxation Office (ATO) has announced significant insights into tax deductions claimed by Australians, revealing that the average tax deduction reached an impressive $3,518 in the 2022-23 financial year. As tax return time approaches, experts are advising taxpayers to familiarise themselves with potential claims while being wary of what is not deductible.
According to the latest ATO statistics, Australians claimed an average of $2,639 in work-related expenses, marking the highest average in over a decade—exceeding the amounts claimed during the pandemic years. In total, over 10.3 million Australians claimed a work-related deduction, out of 16.1 million individual tax returns analysed, which included various categories such as expenses incurred while working from home.
Belinda Raso, director of Tax Invest Accounting, emphasised the importance of knowing what one can claim. She encouraged taxpayers to aim for that average claim of approximately $3,500. “It is important that you start arming yourself with the information of what you can and can’t claim this year,” she advised.
Among notable claim categories, expenses associated with managing tax affairs were the second most common deduction, with more than six million Australians claiming an average of $370 for these costs, primarily related to hiring tax accountants. Additionally, deductions for gifts and donations saw a considerable increase, with over 4.4 million taxpayers claiming an average of $2,032, up significantly from $1,067 the previous year.
The most substantial deduction came from personal superannuation contributions, where over 679,000 individuals claimed an astonishing average deduction of $17,380. Another significant category was interest charges from the ATO, with over 302,000 taxpayers claiming an average of $2,362. However, starting from July 1 this year, interest charged by the ATO for late or underpayments has become non-deductible. This policy change is aimed at ensuring fairness for taxpayers who pay their tax obligations punctually.
Rob Thomson, ATO assistant commissioner, pointed out that this year’s scrutiny will particularly focus on work-related expenses. He warned that these claims must closely relate to income-earning activities and encouraged taxpayers to maintain thorough records of their claims, such as receipts and invoices. Thomson stated, “If your deductions don’t pass the ‘pub test’, it’s highly unlikely your claim would meet the ATO’s strict criteria.”
The ATO will also be vigilant regarding working-from-home deductions, and taxpayers can choose between two methods: the fixed rate or actual costs method for claims. Taxpayers uncertain about allowable claims are recommended to consult the ATO’s website for comprehensive guidance or speak to a registered tax professional. Thomson cautioned, “Don’t just claim it and hope for the best, as penalties and interest may apply.”
For those seeking more tailored advice, the ATO provides useful information on specific deductions related to various occupations on its official website, assisting taxpayers in navigating their claims effectively.
As tax time approaches, staying informed about deductions can lead to maximised benefits and potentially lower tax liabilities, underscoring the importance of understanding the intricacies of tax regulations for every Australian taxpayer.
