What’s a deduction — and what are the rules?
Before you claim a cent, it pays to understand how deductions actually work and the three simple rules the ATO uses to decide what’s allowed. Get these right and the rest is easy.
A deduction lowers the income you’re taxed on
A tax deduction is an expense you’re legally allowed to subtract from your income before the ATO works out your tax. Lower taxable income means less tax — and usually a bigger refund.
One thing people get wrong: a deduction isn’t a dollar-for-dollar refund. You get back your marginal tax rate on the amount you claim. If you’re taxed at 32.5% and you claim a $1,000 work expense, you get roughly $325 back — not the full $1,000. The expense still has to be real money you actually spent earning your income.
The three golden rules for work claims
Every work-related deduction has to pass all three of these. If a claim fails even one, leave it off your return.
You paid for it yourself
The money came out of your own pocket and you weren’t reimbursed by your employer.
It’s directly work-related
The expense directly relates to earning your income. If something is part work, part private, you can only claim the work portion.
You can prove it
You have a record — a receipt, invoice or logbook — to back up what you claim if the ATO ever asks.
Keep proof — it’s the rule people break most
Good records are what turn a nervous guess into a confident, legitimate claim. The simplest habit is to photograph receipts the moment you get them, so nothing fades or goes missing.
Keep written evidence for work expenses — receipts, invoices or bank statements.
For cars and travel, a logbook or diary records the work-use portion.
Hold onto records for five years from the date you lodge.
How you can get a bigger refund
A plain-English walk-through of how deductions translate into real money back — and why most people leave so much of it on the table.
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