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  • What to report at foreign deduction labels

    Your client may be able to claim deductions for expenses incurred in earning their foreign income. For example, work-related expenses incurred while performing their job as an employee.

    Any expenses claimed must reflect the expenses that would be allowable as a deduction if the foreign income was assessable in Australia and the same record keeping rules apply.

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    Total employee work-related deductions

    You may be able to claim deductions for work-related expenses your client incurred while performing their job as an employee.

    Generally, you incur an expense in an income year when either:

    • you receive a bill or invoice for an expense that you are liable for and must pay (even if you don’t pay it until after the end of the income year)
    • you do not receive a bill or invoice but you are charged and you pay for the expense.

    If an expense includes an amount of indirect tax such as a goods and services tax (GST) or a value added tax (VAT), the GST/VAT is part of the total expense and is therefore part of any deduction. For example, if your client incurred union fees of $440 which included $40 GST/VAT, they claim a deduction for $440.

    Include here the following work-related expenses incurred as an employee:

    Car

    Work-related car expenses are expenses incurred as an employee for a car your client either:

    • owned
    • leased
    • hired under a hire-purchase agreement.

    Travel

    Work-related travel expenses are travel expenses your client incurred in performing their work as an employee. They include:

    • public transport, including air travel and taxi fares when travelling for work
    • bridge and road tolls, parking fees and short-term car hire when travelling for work
    • meal, accommodation and incidental expenses incurred while away overnight for work
    • expenses for motorcycles and for vehicles with a carrying capacity of one tonne or more, or nine or more passengers, such as utility trucks and panel vans
    • actual expenses (such as petrol, oil and repair costs) incurred to travel in a car that is owned or leased by someone else.

    If the employer provided a car for your client or their relatives’ exclusive use and your client was entitled to use it for non-work purposes, your client cannot claim a deduction for its running costs (petrol or repairs). However, they can claim expenses such as parking and bridge and road tolls for work-related use of the car.

    Clothing

    Your client can claim expenses incurred as an employee for work-related:

    • protective clothing
    • uniforms
    • occupation-specific clothing
    • laundering and dry-cleaning of clothing listed above.

    They can claim the cost of a work uniform that is distinctive (such as one that has the employer’s logo permanently attached to it) and it must be a compulsory uniform that can be a set of clothing or a single item that identifies the individual as an employee of an organisation. There must be a strictly enforced policy making it compulsory to wear that clothing at work. Items may include shoes, stockings, socks and jumpers where they are an essential part of a distinctive compulsory uniform and the colour, style and type are specified in the employer’s policy.

    Your client can also claim the cost of:

    • occupation-specific clothing which allows people to easily recognise that occupation (such as the checked pants a chef wears when working) and which are not for everyday use
    • protective clothing and footwear to protect from the risk of illness or injury, or to prevent damage to ordinary clothes, caused by the work or work environment. Items may include fire-resistant clothing, sun protection clothing, safety-coloured vests, non-slip nurse’s shoes, steel-capped boots, gloves, overalls, aprons, heavy duty shirts, trousers (but not jeans),protective equipment, (such as hard hats and safety glasses)
    • renting, repairing and cleaning any of the above work-related clothing
      (if your client did washing, drying or ironing, you can use a reasonable basis to calculate the amount, such as AUD$1 per load for work-related clothing, or 50 cents (AUD) per load if other laundry items were included).

    Your client cannot claim the cost of purchasing or cleaning plain uniforms or clothes, such as black trousers, white shirts, suits or stockings, even if the employer requires your client to wear them.

    Self-education

    Your client can claim self-education expenses that are related to their work as an employee and which they incur when doing a course to get a formal qualification from a school, college, university or other place of education.

    To claim a deduction for self-education expenses, your client must have met one of the following conditions when they incurred the expense:

    • the course maintained or improved a skill or specific knowledge required for their work activities at that time
    • they could show that the course was leading to, or was likely to lead to, increased income from their work activities at that time
    • other circumstances existed which established a direct connection between the course and their work activities at that time.

    Your client cannot claim a deduction for self-education expenses for a course that:

    • relates only in a general way to their current employment or profession
    • will enable them to get new employment.

    Your client cannot claim contributions they, or the Australian Government, made under the HECS-HELP, or repayments under the Higher Education Loan Program (HELP), the Student Financial Supplement Scheme (SFSS), the Student Start-up Loan (SSL) or the Trade Support Loan Program (TSL).

    Examples of expenses your client can claim are:

    • textbooks
    • stationery
    • student union fees, student services and amenities fees
    • the decline in value of their computer
    • certain course fees.

    Other expenses

    Other work-related expenses are expenses your client incurred as an employee and has not claimed above. These include:

    • union fees and subscriptions to trade, business or professional associations
    • professional seminars, courses, conferences and workshops
    • reference books, technical journals and trade magazines
    • safety items that protect from the risk of injury or illness posed by their work or work environment, such as hard hats, safety glasses and sunscreens
    • the work-related proportion of some computer, phone and home office expenses
    • tools, equipment and other assets (your client may be able to claim an immediate deduction for the full cost of depreciating assets costing $300 or less; for more information see Guide to depreciating assets).
      Your client cannot claim a deduction for the decline in value of items provided to them by their employer, or if the employer paid or reimbursed them for some or all of the cost of those items, and the item would have been exempt from the Australian fringe benefits tax.

    For home office expenses, your client can either:

    • keep a diary of the details of actual costs and work-related use of the office
    • use a fixed rate of 45 cents (AUD) per hour for heating, cooling, lighting and the decline in value of furniture in the home office.
    Total depreciation deduction

    You may be able to claim a deduction for the decline in value of a depreciating asset which your client held during the income year to the extent that they used it to produce income that you have reported in the non-resident foreign income schedule.

    Depreciating assets include; items such as tools, reference books, computers and office furniture.

    You may be able to claim an immediate deduction for the full cost of depreciating assets costing $300 or less. Use the Depreciation and capital allowance tool to work out the deduction if the cost is not fully deductible.

    Total interest and dividend deduction

    Interest

    Include any allowable expenses that your client would be entitled to claim if the foreign income reported in the Non-resident foreign income schedule were assessable income in Australia. Expenses include:

    • bank or other financial institution account-keeping fees for accounts held for investment purposes
    • fees for investment advice relating to changes in the mix of your client's investments
    • interest paid on money borrowed to purchase income-producing investments.

    If they had a joint account or shared an interest-earning investment, claim only their share of the joint expenses.

    If money was borrowed to purchase assets for private use and income-producing investments, you can claim only the portion of the interest expenses relating to the income-producing investments.

    You can claim a proportion of the decline in value of your client's computer, based on the percentage of total computer use that related to managing investments. If your client has different investments, such as interest-earning investments and shares, claim this deduction only once.

    Dividends

    Include any expenses incurred earning the gross foreign dividends you reported.

    Expenses include:

    • fees for investment advice relating to changes in the mix of shares or similar investments
    • interest incurred on money borrowed to purchase shares or similar investments
    • costs relating to managing shares or similar investments, such as travel and buying specialist investment journals or subscriptions.

    If your client had joint share investments or similar shared investments, you can claim only their share of joint expenses.

    If your client borrowed money to purchase assets for private use and income-producing investments, they can claim only the portion of the interest expenses relating to the income-producing investments.

    Your client can claim a proportion of the decline in value of their computer, based on the percentage of total computer use that related to managing their investments. If they have different investments, such as interest-earning investments and shares, claim this deduction only once.

    Total UPP of a foreign pension

    Your client may be entitled to claim a deduction to reduce their reported foreign pension or annuity income if the pension or annuity has an undeducted purchase price (UPP).

    Only some foreign pensions and annuities have a UPP. The UPP is the amount they contributed towards the purchase price of their pension or annuity (their personal contributions).That part of the annual pension or annuity income which represents a return to your client of their personal contributions is free from tax. This tax-free portion is called the deductible amount of the UPP, and it is usually calculated by dividing the UPP of the pension or annuity by a life expectancy factor, according to life expectancy statistics.

    For more information on pensions from another country, see Deductible amount of undeducted purchase price of a foreign pension or annuity.

    Total personal super contributions

    Your client may be able to claim a deduction for personal superannuation contributions made to a complying Australian superannuation fund or a retirement savings account (RSA) if:

    • they satisfied the age-related conditions
    • they gave a valid notice of intent to the fund or RSA provider, in the approved form, and advised them of the amount your client intends to claim as a deduction (they must give this notice on or before the day their 2018 non-resident foreign-sourced income is reported or 30 June 2019, whichever is earlier)
    • your client's fund or RSA provider acknowledged the valid notice
    • your client's fund was not a  
      • Commonwealth public sector superannuation scheme with a defined benefit interest
      • constitutionally protected fund or other untaxed fund that would not include the contributions in their assessable income
      • super fund that notified the Commissioner before the start of the income year that they elected to treat all member contributions to the:  
        • super fund as non-deductible
        • defined benefit interest within the fund as non-deductible.
         
       

    For more information, see Personal superannuation contributions.

    Total other

    If there are other expenses that would be allowable as a deduction if the foreign income was assessable, which your client has not been able to claim elsewhere in the Non-resident foreign income schedule, you can include them here.

    See also:

    • Other deductions for more information about what can be claimed - note that this link takes you to the Australian income tax return information and that some items which are specific to Australian residents do not apply in your client's situation.
    Prior year tax losses

    If your client has a foreign tax loss from an earlier income year which has not been claimed as a deduction, you can include it here.

    There may be a foreign tax loss this year which you may be able to claim as a deduction. You must complete this section whether or not you are able to claim a deduction for the loss this year.

    If there are foreign tax losses from more than one earlier income year you should generally deduct the earliest losses first.

    To complete this field you will need records of your client's tax losses from earlier income years.

    Last modified: 01 Jul 2019QC 52826