Don’t Leave a Dollar on the Table

No one likes to pay a dollar more of tax than they have to. John Knight looks at some surprising facts about hammers, ping pong and what you do on the way home from work when it comes to the perennial question: can you claim it?

Clients of ours ask if they can claim a tax deduction for some weird and wacky expenses. Given that we at businessDEPOT work on the basis of ‘you don’t know what you don’t know’, this stands to reason. Here are nine of my favourites from the real estate industry and my verdict on their deductibility.

  1. Wii, ping pong and pinballs
    Although the rules around the tax deductibility of any expenses considered ‘entertainment’ are very strict, if you buy a Wii, ping pong table, pinball machine or similar items for the workplace these can be deductible. Depending on the cost of the item, you may need to spread the deduction over a couple of years as depreciation.
  2. Booze, entertainment and travel
    As a general rule, any events that involve alcohol are considered entertainment and are not deductible. The exception to this is the cost of meals, including an accompanying beverage, while travelling overnight, which is deductible. If you are paid a travel allowance this needs to be shown as income and offsets the deduction, unless the travel allowance is paid in accordance with the ATO guidelines. In this case you do not show the income but also cannot claim the deduction.
    As an employer you may also be liable for Fringe Benefits Tax (FBT) on entertainment, so get advice.
  3. Yes, you need a log book
    In real estate we (and the ATO) expect you to have a high work usage of your car. If you simply guess your work usage percentage, the ATO will deny your deduction in its entirety unless you can produce a logbook.
  4. Work on the way to the office
    When working out the work usage of your car, travel from home to the office is not deductible. Think about what you need to do on the way to work; call into the post office, inspect a property or have a meeting at the coffee shop closer to home to maximise your work usage.
  5. Gym memberships, bootcamps and health retreats
    If as a business you provide the team with gym memberships, bootcamps or health-related benefits, these may be deductible but are subject to FBT. The FBT rate is currently 49 per cent and is a cost of the employer. Ouch! Rarely is it tax effective to provide these types of benefits.
    Sorry, but the health retreat in Bali is not deductible even if it does make you more focused, more mindful and more Zen to conquer work; it is considered private in nature.
  6. Gifts, prizes and rewards
    Gifts for clients are deductible – even booze (provided it is not consumed with them). Gifts, prizes and rewards for employees on an ad-hoc basis can be deductible. However, when you run an internal competition with something like an overseas trip or TV as the prize, this is considered part of their remuneration package and will be subject to FBT, again increasing the tax rate to 49 per cent.
  7. Sunscreen, sunnies, hats and umbrellas
    It’s quite arguable that as a real estate agent you are required to work outside for a large part of the day. Whether for open houses or auctions, if you incur the cost of sunscreen, sunnies, hats and umbrellas to protect you from the sun and rain, these can be deductible.
  8. Suits, frocks and shoes
    Unfortunately, unless your suits, frocks and shoes are specifically branded as your agency’s uniform they are not deductible. The rule of thumb is if you could, or would, wear it out on a weekend it is not tax deductible. In the same vein, getting your hair done for the awards night is not deductible, because it relates to your personal appearance and is considered private in nature.
  9. Hammers, iPads, pens and phones
    All the tools of the trade that you purchase to enable you to do your job are deductible. You may need a hammer for signboards. You may need a bag to carry your laptop. If you can establish that you purchased it to enable you to do your job, it is deductible. Larger items again may need to be spread out over a couple of years. Remember – everyone’s position is unique – seek advice!

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John Knight

John Knight is the Managing Director of businessDEPOT, a team of energetic accountants and advisors.