How major purchases could impact your tax return

Tax time tips

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Major purchases are a part of life that are sometimes unavoidable and could impact your financial situation, particularly when it comes to taxes.

In this article, we’ll take a look at examples of some major purchases and the different ways they might impact the things you consider when lodging your tax return.

Buying a Car

Using your car for work-related purposes could make you eligible to claim car expenses as a tax deduction when lodging your tax return. Understanding these expenses can help reduce your taxable income and increase your tax refund.

Here are some things you should know about claiming work-related car expenses in your tax return!

Cents per Kilometre

You can claim a set rate for each kilometre you travel for work purposes.

According to the ATO, as of 2024, the rate is 88 cents per kilometre. This is redeemable up to 5,000 km per year, and you must maintain a log of work-related trips, including the date, purpose, and distance.

For a more detailed rundown visit the ATO website here.

Parking Fees and Tolls

Work-related parking and transit fees might be deductible when lodging your tax return, but these apply to specific instances. For instance, parking near your office or taking toll roads to and from work wouldn’t be eligible for a deduction. However, in cases where you are required to drive to a specific location for work purposes and incur costs, these fees may be deductible.

If your employer is willing to reimburse you for the fees, they are no longer deductible as the ATO mentions specifically to only claim either from the government or your employer. More information on what you can or can’t claim as a car-related tax deduction can be found on the ATO website.

Buying a House

Purchasing a house is a major purchase that could come with various tax advantages. As a property owner, you might be able to lower your overall taxable income.

Here are a couple of ways how!

Interest into tax credit

If this isn’t your first property, you might be eligible for additional tax deductions. For instance, if you purchase a house or apartment to use as a rental property, the interest paid on your loan could be tax-deductible against the income you earn from renting it out. This could help offset rental income and reduce your overall taxable income.

Depreciation

For investment properties, you could claim depreciation on the building and fixtures. This includes of 2 main components:

Capital works depreciation which is the ability to claim the construction costs of the building itself. You are able to claim approximately 2.5% of the original cost, over 40 years. The ATO explains and gives examples of this in more detail here.
Plant and equipment depreciation which is applied to removable items within the property such as appliances, furniture and fittings.

By understanding and utilising these tax benefits, you might be able to reduce your tax liabilities. Check out H&R Block blog for more information on property depreciation.

For personalised advice, consider consulting with a tax or other finance professional.

Enrolling in self-education

Self-education can lead to some benefits when lodging your tax return, especially when it comes to tuition fees.

Here’s a detailed look at how you could claim tuition fees in your tax return.

Eligibility

Courses must be related to your current work.
Courses must result in an improvement in specific skills and knowledge, or lead to an increase in your income.

Variety of courses

Courses could range from top universities to 30-minute workshops.

Claim deductions

Tuition fees should be claimed at the end of the year and not when the course is completed.

Other self-education expenses you may be able to lodge in your tax return includes textbooks, study materials, travel cost and computer expenses.

It’s important to note that any deductions you claim when lodging your tax return are supported with receipts and/or logbooks. You can check the ATO’s website for the specific formula to determine the deductible portion of the expenses or use their calculator available website.

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