Tax deduction
An expense you can subtract from your income before tax is calculated, reducing what you are taxed on.
A deduction lowers your taxable income, not your tax bill directly. Claiming $1,000 does not save you $1,000 — it saves you $1,000 multiplied by your marginal rate.
To be deductible, an expense generally has to meet three conditions: you spent the money yourself and were not reimbursed, it directly relates to earning your income, and you have a record to prove it. Private and domestic costs never qualify.
Where an expense is part work and part private, you claim only the work portion. A phone bill used 60% for work is 60% deductible, and you need a reasonable basis for that percentage rather than a guess.
What a $1,000 deduction is actually worth
On a 16% marginal rate it saves $160. On 30% it saves $300. On 45% it saves $450. The expense still cost you the full $1,000 either way.
The bit people get wrong
Buying something purely to get the deduction always leaves you worse off in cash terms. You spend a dollar to save at most 45 cents. Deductions reward spending you needed to make anyway, not spending invented at the end of June.
Common questions
Do I need receipts for everything?
If your total work-related claims exceed $300 you need written evidence for all of them, not just the amount over $300. Some claims like laundry and cents-per-km have their own separate substantiation rules.
What is the difference between a deduction and an offset?
A deduction reduces the income you are taxed on, so its value depends on your marginal rate. An offset reduces the tax itself dollar for dollar, so it is worth the same to everyone who qualifies.
Can I claim my commute to work?
Generally no. Travel between home and your regular workplace is private, though travel between two workplaces, or carrying bulky tools you cannot leave on site, can qualify.
Run your own numbers
Related terms
Source: Australian Taxation Office