Real estate employees - claiming work-related expenses
Real estate employees - claiming work-related expenses
When you can make a claim
In most situations, you can claim deductions for work-related expenses as long as your claim meets the following conditions:
- you incurred the expense in doing your job
- the expense is not private (personal)
- you can show you incurred the expense by producing receipts or other written evidence.
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If you are claiming a deduction for an expense you incurred for something you used partly for work and partly for personal purposes (such as mobile phone costs), you can only claim that portion of the expense that relates to your business use.
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Evidence to support your claims
If your total claims add up to more than $300 (excluding claims for car, meal allowance, award transport payment allowance and travel allowance expenses), you must keep written evidence, such as receipts. Your written evidence must show you have incurred the full amount of your claim, not just the amount over the first $300.
If the total amount you are claiming is $300 or less, you do not need to keep receipts, but you must be able to show how you worked out your claims.
You need to keep your written evidence of work-related expenses for five years from the due date for lodging your tax return. If you lodge your return after the due date, the five years start from this later date.
For depreciating assets, you must keep records for a further five years from the date of your last claim for decline in value.
Your evidence of expenses incurred can be in written or electronic format. We recommend that:
- when you store your written documentary evidence, you photocopy the original. Receipts for items such as fuel and oil can fade particularly when exposed to heat and sunlight.
- when you store your records electronically, you make a back-up copy in case the original becomes inaccessible or unreadable - for example, where a hard drive is corrupted.
Example 1
Marco claims his car expenses through the logbook method, and does not need to keep the receipts for fuel and oil but he does need to keep receipts for repairs and maintenance.
He photocopies the thermal paper receipts to protect the information. The photocopies contain the required information and are a true and clear reproduction of the original. This copy would be sufficient evidence to support his claims.
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When you complete the declaration on your income tax return, you are declaring that:
- everything you have told us is true
- you can support your claims with written evidence.
You are responsible for providing proof of your expenses, even if you use a registered tax agent to prepare your return.
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Work-related daily travel expenses you can claim
Travel expenses that you claim must directly relate to your work as an employee.
These expenses may include:
- work-related car expenses
- expenses for motorcycles and vehicles with a carrying capacity of one tonne or more, or nine or more passengers
- actual expenses - such as any petrol, oil and repair cost if you travel in a car that is owned or leased by someone else
- public transport - including taxi fares
- bridge and road tolls
- parking fees
- short-term car hire.
Generally, the cost of normal trips between your home and work is a private expense that you cannot claim an income tax deduction for. However, as an employee in the real estate industry, there are certain situations where you may be able to claim deductions for travel between your home and workplace.
Travelling between workplaces
Work-related car and travel expenses include the cost of travel:
- directly between two separate workplaces - for example, when you have a second job
- from your normal workplace to an alternative workplace while you are still on duty, and back to your normal workplace or directly home - see Example 2
- from your home to an alternative workplace, and then to your normal workplace or directly home - see Example 3.
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Where your employer has offices in the city or town where you reside, your home office is not a place of business, even if your work requires you to work outside normal business hours.
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Example 2
Trevor is a real estate agent who travels from his normal workplace to his employer's head office to attend a meeting. After the meeting he travels directly back to his normal workplace and then home.
Trevor can claim the cost of each journey between his workplace and head office as a deduction as the trips are for work purposes.
Example 3
Patricia is a property manager who looks after a large number of properties. Two mornings a week Patricia travels from home directly to different clients' properties to carry out rental inspections. She then travels to her normal workplace.
Patricia can claim a deduction for the travel between:
- home and different clients' properties
- one client's property and another
- clients' properties and her normal workplace.
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If you travel to and from a place of education because you are completing a work-related education course, you may be entitled to claim the travel costs as a self-education expense.
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Transporting bulky tools and equipment
You can claim the cost of using your car or vehicle to travel between home and work if:
- you have to carry bulky tools and equipment you need to use for work
- it is essential to transport them to and from work and it is not done as a matter of convenience or personal choice
- there is no secure area for storing them at your workplace.
Example 4
Sue is a real estate sales person who uses a laptop computer in the office and when she visits clients. She carries the computer to and from work in her car. As the computer is not considered bulky equipment she cannot claim a deduction for her travel costs to and from work based on transporting bulky tools and equipment.
How to claim your work-related daily travel expenses
How you work out your claims and what records you need to keep will depend on whether the motor vehicle you use is considered to be a car and whether you own or lease it.
Working out if your vehicle is a car
Your vehicle is considered not to be a car if it is any of the following:
- a vehicle with a carrying capacity of one tonne or more, such as a utility truck or panel van
- a vehicle with a carrying capacity of nine passengers or more, such as a minivan
- a motorcycle.
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If you are doing your own income tax return, you claim your car expenses at D1 Work-related car expenses.
If you use a vehicle other than a car, such as a van with a carrying capacity of one tonne or more, you claim your actual expenses at D2 Work-related travel expenses on your income tax return.
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Claiming car expenses
If you are entitled to claim a deduction for your work-related car expenses, there are four methods you can use to work out the amount you can claim.
The four methods are the:
- cents per kilometre method
- logbook method
- 12% of original value method
- one-third of actual expenses method.
The following two methods are those most commonly used by real estate employees.
Cents per kilometre method
You can use this method to claim up to a maximum of 5,000 work kilometres per car even if you have travelled more than 5,000 work kilometres. For example, if you travelled 5,085 work kilometres, you can only claim the cost of travelling 5,000 kilometres with this method. You cannot claim for the extra 85 kilometres.
When working out your declaration using the cents per km method, you do not need receipts or other written evidence but we may ask you how you worked out your estimate of work kilometres. For example, by:
- using a diary of work-related travel
- basing your costs on a regular pattern of travel.
Example 5
Henry is a real estate salesperson. From his diary notes of appointments during the 2011 income year, Henry calculates that he has travelled 4,825 kilometres for work-related activities. Although he does not have an established pattern of travel, his diary notes form a reasonable basis for his calculation.
Logbook method
The logbook method provides a way of working out the percentage of your car use that is for work purposes. You can then claim a deduction for this percentage of each car expense you incur.
To work out your deduction using the logbook method, you must keep:
- A logbook. To work out the percentage of your car use that was for work purposes, your logbook must cover a period of 12 continuous weeks and is valid for five years.
- Odometer records. Record your opening and closing odometer readings for each year you use the logbook method.
- Written evidence for all your car expenses. You can use your odometer records to estimate your fuel and oil costs instead of keeping receipts.
Remember, your car expenses do not include capital costs such as the purchase price of your car or the cost of improvements (not repairs) you make to it.
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You can claim a deduction for the decline in value (depreciation) of your car up to the value of the luxury car limit if you use either the logbook or the one-third of actual expenses method.
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Claiming expenses for vehicles other than cars
If you are eligible to claim your vehicle expenses and your vehicle has a carrying capacity of one tonne or more, such as a van, you can only claim your actual expenses.
To determine whether your vehicle has a load carrying capacity of one tonne or more you will need to refer to the manufacturer's handbook for your vehicle. The load carrying capacity of your vehicle is the difference between the gross vehicle mass and the kerb weight.
Your actual expenses include the cost of:
- fuel and oil
- repairs and servicing
- interest on a car loan
- lease payments
- insurance
- registration.
If you use your vehicle for both work and private purposes, you can use a diary to show how much of your expenses relate to each. Remember to keep receipts for your actual expenses.
Leasing and hire purchase payments
One of the big differences between commercial leasing and hire purchase is in the handling of tax deductions. With hire purchase, instead of claiming the whole monthly payment as a tax deduction as you do with a lease, you claim the depreciation of the motor vehicle and any interest charged.
Hire purchase
Under a commercial hire purchase agreement you do not become owner of the motor vehicle until all monies owed under the arrangement are paid. However, you can still claim a tax deduction for the depreciation on the motor vehicle as well as the interest component of the loan repayments to the extent that the motor vehicle is used for work-related purposes. That is, interest on the loan payments and depreciation up to the luxury car tax or depreciation limit threshold.
Commercial leasing
If you take out a car lease, the lender agrees to rent the vehicle to you for a set period for an agreed amount. If the vehicle is entirely for work purposes and not a luxury car, the lease payments are fully tax deductible but you cannot claim depreciation.
If the vehicle is a luxury car, you can claim a tax deduction for the finance component of the lease payments (interest) but not for the part of the lease payments that represent repayments of principal. You can also claim a deduction for depreciation subject to the luxury car tax threshold.
If you lease a car under a salary sacrifice novated lease arrangement, you cannot claim a deduction for the lease payments as these expenses are incurred by your employer. You also cannot claim depreciation.
Work-related clothing, laundry and dry-cleaning expenses you can claim
You may be able to claim a deduction for the costs you incur when you buy, rent, repair or clean your work clothing. Deductible work clothing includes:
- compulsory uniforms and corporate wardrobes
- a single item of distinctive clothing such as a jumper, shirt or tie with the employer's logo if it is compulsory for you to wear it
- a non-compulsory corporate uniform that your employer has registered with AusIndustry - check with your employer if you are not sure
- protective clothing and footwear to protect you from the risk of illness or injury, or to prevent damage to your ordinary clothes, caused by your work or work environment. Items may include sun-protection clothing, safety coloured vests, rubber boots and steel-capped boots.
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Sunglasses, sunhats and sunscreens are not considered to be items of protective clothing but you can claim a deduction for these items if you:
- have to work in the sun for all or part of the day, and
- use these items to protect yourself from the sun while at work.
You can claim these expenses at item D5 Other work-related expenses on your tax return.
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If you are doing your own tax return, ensure you select the code letter that describes the type of clothing you are claiming.
N
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Non-compulsory work uniform
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C
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Compulsory work uniform
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S
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Occupation-specific clothing
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P
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Protective clothing
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Example 6
Lena is a sales person with a large real estate company. She also works in the reception area for a number of hours each day. The reception staff wear a suit in the company's colours monogrammed with the company logo. It is not compulsory for a staff member to wear the clothing but the employer encourages staff members to do so.
Lena can claim a deduction for the cost of buying and maintaining the suit if the uniform is entered on the Register of approved occupational clothing. It is the employer who seeks registration for the clothing with AusIndustry.
Laundry and dry-cleaning
You can claim a deduction for the cost of washing, drying and ironing your deductible work clothing as laundry expenses. This also includes laundromat expenses and the actual cost of dry cleaning.
If your total claim for work-related expenses is $300 or less, or the total amount of your laundry expenses is $150 or less, you do not need to keep receipts or other written evidence of your claim. However, you must be able to show how you worked out your claim.
If your claim for laundry expenses is more than $150 and your total claim for work-related expenses is more than $300 (not including car, meal allowance, award transport payment allowance and travel allowance expenses), the records you must keep include:
- receipts, or other written evidence of your expenses
- diary entries you make to record
- your small expenses ($10 or less) totalling no more than $200 that you do not have a receipt for
- expenses that you cannot get any kind of evidence for regardless of the amount - for example, a diary record of your laundromat costs.
You cannot claim a deduction for the cost of purchasing or cleaning a plain uniform or conventional clothing you wear to work, even if your employer tells you to wear it. This includes:
- clothing you wear for medical reasons, such as support stockings
- conventional clothing that is damaged at work
- everyday footwear such as dress, casual or running shoes.
Example 7
Mike is a real estate agent. At work, Mike has to wear shirts his employer provides. Each shirt has his employer's company logo embroidered on it. As part of his uniform, he also has to wear black pants and black shoes.
Mike can claim a deduction for the cost of laundering the shirts as they are:
- distinctive items with the employer's logo
- compulsory for him to wear at work.
However, he cannot claim the cost of purchasing or cleaning his black pants or shoes as they are items of a conventional nature.
Work-related home office expenses you can claim
Running expenses
If you perform some of your work from your home office, you may be able to claim a deduction for the costs you incur in running your home office, even if the room is not set aside solely for work-related purposes. You may be able to claim:
- the decline in value (depreciation) of home office equipment such as computers and telecommunications equipment - if your equipment costs $300 or less, you can claim a full deduction for the work-related portion
- the cost of heating, cooling and lighting your home office that is over the amount you would ordinarily have to pay if you did not work from home
- the costs of repairs to your home office furniture and fittings.
Example 8
Sylvette uses her computer and personal internet account at home to access her work emails and review the online real estate websites. Sylvette uses her computer and the internet for work and private purposes.
Sylvette's internet use diary showed 40% of her internet time was for work-related activities and 60% was for private use. As her internet service provider charge for the year was $1,200 she can claim:
$1,200 x 40% = $480 as work-related internet use.
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A depreciating asset, such as a computer, is an asset that has a limited effective life and can reasonably be expected to decline in value over the time you use it.
For depreciating assets, you must keep records for a further five years from the date of your last claim for decline in value.
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The records you must keep may include:
- receipts or other written evidence of your expenses, including receipts for depreciating assets you have purchased - for example, your computer
- diary entries you make to record your small expenses ($10 or less) totalling no more than $200, or expenses you cannot obtain any kind of evidence for, regardless of the amount - for example, stationery.
Working out your claim
To claim a deduction for the electricity and gas you use and the decline in value of your office furniture, you can claim either of the following:
- a deduction for your actual expenses
- a deduction you work out at a rate of 34 cents per hour.
To use the 34 cents per hour method of claiming, keep a diary to record the amount of time you use your home office for work purposes. The diary must show a representative period of at least four weeks to establish a pattern of use for the whole year.
Example 9
Anuja uses a diary to record the time she uses her home office for work purposes. Based on her diary entries, Anuja works out she spends an average of three hours each week night working in her home office. Anuja works for 38 weeks each year.
Anuja chooses to use the fixed rate of 34 cents per hour to work out the amount she can claim for her home office expenses.
Anuja calculates her home office running expense deduction as follows:
38 weeks x 15 hours x 0.34 cents = $193.80
Work-related home office expenses you cannot claim
Occupancy expenses
Occupancy expenses include rent or mortgage interest, council rates and house insurance premiums. You can only claim occupancy expenses where your home office is considered to be a place of business. If your only income is paid to you as an employee, you are generally not able to claim a deduction for your occupancy expenses.
Other expenses you may be able to claim
Phone expenses
You can claim a deduction for the cost of work-related phone calls you make, including calls from mobile phones.
You can also claim a deduction for your phone rental if you can show you were on call or you had to call your employer or clients regularly while you were away from your workplace.
If you also used your phone for private purposes, you can only claim that portion of your phone rental costs and calls that relate to your work-related use of the phone - see Example 10.
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If you are reimbursed for part or all of your phone expenses, you cannot claim a deduction for that portion.
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Keeping records of phone expenses
You may be able to identify your work-related calls individually on your itemised telephone account. If you do not receive itemised accounts, you can make a reasonable estimate of your call costs based on diary records you have kept over a minimum four-week period, together with your relevant telephone accounts.
Example 10
Sebastian uses his mobile phone for work purposes. He is on a set plan of $49 a month and rarely exceeds the plan cap.
Sebastian receives an itemised account from his phone provider each month by email that includes details of the individual calls he has made.
At least once a year, Sebastian prints out his account and highlights the work-related calls he made. He makes notes on his account for the first month about who he is calling for work - for example, his manager and his clients.
Out of the 300 calls he has made in a four-week period, Sebastian works out that 240 (80%) of the individual call expenses billed to him are for work and applies that percentage to his cap amount of $49 a month. The other two months that Sebastian reviews are consistent with this.
Since Sebastian was only at work for 46 weeks of the year (10.6 months), he calculates his work-related mobile phone expense deduction as follows:
10.6 months x $49 x 80% = $415.52
Computers and laptops
You can claim a deduction for the cost of purchasing computers or laptops (if $300 or less) that you use for your work. You must apportion the amount of your claim where the computer or laptop has been used in part for private purposes or was not available for use during all of the income year.
If the computer or laptop cost more than $300, you must depreciate the asset via the decline in value process. As a general rule, desktop computers are depreciated over a period of four years, and laptops can be depreciated over three years.
You can claim the work-related proportion of the following:
- the decline in value of a computer
- any repair costs
- the interest on money borrowed to buy the computer
- internet access.
You cannot claim any deduction for decline in value (depreciation) of items used in your employment if they were provided to you by your employer.
Example 11
Michelle purchased her computer on 5 September for $3,000 and has worked out that she uses it 40% for work purposes. Michelle looks up the effective life of depreciating assets on our website that says the effective life of a computer is four years. Michelle uses the prime cost method to work out the decline in value of her computer:
Asset's cost
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X
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Days held
365
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X
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100%
Effective life
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X
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Work use percentage
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$3,000
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X
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299 (5 Sep - 30 June)
365
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X
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100%
4 years
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X
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40%
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So, Michelle claims $246 for the decline in value of her computer in the first year.
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A depreciating asset, such as a computer, is an asset that has a limited effective life and can reasonably be expected to decline in value over the time you use it.
If you purchase a computer that cost more than $300, you can only claim a deduction for its decline in value.
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Camera
You can claim a deduction for the cost of purchasing a camera that you use for work. If the camera costs more than $300, you cannot claim a deduction for the full purchase price. However, you can claim a deduction for its decline in value (depreciation). Your claim for depreciation applies to the whole amount, not just the amount over $300.
If you use the camera partly for private purposes, the amount you can claim depends on the amount of time you use the camera for work purposes. For example, if you use the camera half for work purposes and half for private purposes, you can only claim half the decline in value.
Example 12
Jessica buys a camera for $400 to take photographs of client properties for advertising purposes. Jessica and her children also use the camera to take family photographs. Jessica is entitled to a deduction for the proportion of the depreciation based on the work use for the camera.
You can claim a deduction for the cost of renewing a real estate certificate of registration held by you as an employee in respect of your employment. You cannot claim a deduction for the cost of obtaining the initial certificate of registration.
Advertising
You can claim a deduction for the cost of advertising for example:
- through newspapers
- letterbox drops
- signage
- bunting.
You cannot claim a deduction for the cost of advertising if you earn your income from a fixed salary and you are not entitled to earn commission.
Gifts
You can claim a deduction for the cost of gifts brought for work purposes if you are a salesperson or property manager entitled to receive your income from commission or both commission and retainer. You cannot claim a deduction if you earn a fixed income and you are not entitled to earn a commission.
Gifts you can claim include:
- a Christmas hamper
- a bottle of whisky
- wine
- gift vouchers
- a bottle of perfume
- flowers
- a pen set.
Gifts you cannot claim are tickets to:
- the theatre
- a live play
- a sporting event
- a movie
- a holiday, including an airline ticket
- an amusement centre.
These gifts are in the form of entertainment and are not deductible.
Entertainment
You cannot claim a deduction for entertainment expenses because they are specifically disallowed under the tax law and they are also a private expense. For example, if you buy lunch for a client or business associate, the food and drink expense is ordinarily a private matter, rather than a working or business expense.
You cannot claim a deduction for expenses incurred in attending social functions. These expenses are considered to be private and not sufficiently related to the production of income. The cost of travelling to another workplace to attend a social function is also not deductable.
Example 13
Rachael attends a social breakfast organised by the Real Estate Institute. These breakfasts are held every other month to encourage new salespeople in the real estate industry to meet socially with colleagues. Rachael is not entitled to a deduction for the cost of attending the breakfast.
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The 'provision of entertainment' generally means:
- entertainment by way of food, drink, recreation
- accommodation or travel to do with providing entertainment by way of food, drink or recreation.
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Newspapers
You can claim a deduction for the cost of the work-related portion of those newspapers containing property sections. If there is a sufficient connection between the duties carried out by you as a real estate employee and the content of the newspapers, the portion of the cost of relevant newspapers related to work is allowable.
Example 14
Gerry, a real estate employee, subscribes to the daily newspaper that he shares with his family. The property section of the paper only appears in the Wednesday, Saturday and Sunday papers.
Gerry can claim a deduction for a portion of the cost of the Wednesday, Saturday and Sunday papers.
He cannot claim a deduction for the cost of the newspapers for the other days of the week as these are not used for income-earning activities. The expenditure on newspapers on those days is considered to be private.
What to read or do next
For more information, refer to the following tools and publications:
To obtain copies of our publications:
Phone
For more information, phone us on 13 28 61 from Monday to Friday, between 8.00am and 6.00pm. We can offer you a more personal service if you provide your tax file number.
Other services
If you do not speak English well and need help from us, phone the Translating and Interpreting Service on 13 14 50.
If you are deaf, or have a hearing or speech impairment, phone us through the National Relay Service (NRS) on the numbers listed below:
- TTY users, phone 13 36 77 and ask for the ATO number you need
- Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
- internet relay users, connect to the NRS on www.relayservice.com.au and ask for the ATO number you need.
Last Modified: Thursday, 14 July 2011
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