What can I claim as a tax deduction?
What you can claim as a tax deduction is based on legislation and case law. The law is Income Tax Act 2007 (plus amendments and related regulations) and has two parts that need to be considered:
Section DA 1: The General Permission Test - expenditure incurred in deriving business income.
Section DA2: The Private Limitation Test - that is spending that is not of a private or domestic nature.
Expenditure deductions must be necessarily incurred in production of assessable income and not private in nature. The legislation is a very think volume 3722 pages in fact and new amendments to the Income Tax Act 2007, are passed on a regular basis. To keep on top of the legislative changes takes many hours of what some might call unproductive time to be spent to remain informed. When we know the legislation, we can advise appropriately to ensure our clients do not take an unacceptable tax position resulting in back taxes, penalties and use of money interest. In extreme cases of tax ignorance, or deliberate evasion can result in jail time.
Some quick examples I can recall of things that have been attempted to be claimed that could have resulted in the aforementioned back taxes and penalties if we had not advised against:
What you can and can't claim is not always straight forward and each situation is different. If in doubt, it pays to ask.