Chances are you’re seen at least one ad for an “EFOY” sale already today.
EOFY, an acronym for end of financial year, is a time when businesses offer discounts on products and sometimes encourage shoppers to buy items to write off as deductions on their upcoming tax returns.
The combination of a discounted price and the potential for more money back in your tax return is enticing, but think twice before spending.
Because even if that item is a legitimate deduction, you won’t be getting the full price back in your tax return.
Don’t all ‘write offs’ work out to be free?
Nope.
The Australian Taxation Office (ATO) doesn’t match deductions dollar-for-dollar in your tax return.
We went to Elizabeth Morton, a senior lecturer at Curtin University and chartered accountant, to break down the deduction myths for us.
“Taxpayers will not get $1,000 cash back from the ATO from spending $1,000 on a work-related item,” Dr Morton said.
Her explanations are not tax advice and are for educational purposes only.
We’re also only talking about individuals here, not businesses or sole traders.
But hopefully Dr Morton’s examples give you a better idea about how deductions work and help you to make more informed choices when you’re considering a work-related EOFY sales purchase.
“We need to be especially mindful of anything we see in our feeds at tax time and ensure we get appropriate tax advice from a registered tax practitioner,” she said.
So how much could I get back?
“The ‘write off’ [deduction] you may or may not be eligible for is only going to be as good as the tax rate you pay,” Dr Morton said.
“So if you spend $1,000 and are taxed at a rate of 30 per cent, then the tax savings is only $300.”
Your tax rate is determined by how much you earn a year.
Here are the tax rates for Australian residents for the 2025-26 financial year:
| Taxable income | Tax on this income* |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,638 plus 45c for each $1 over $190,000 |
* The above rates do not include the Medicare levy of 2 per cent.
But that’s assuming the deduction is 100 per cent a work expense.
You might only be able to claim part of it
You might use the item for work, but you also use it when you’re not working. That’s going to impact how much you can claim.
“If there is private usage, then the expense needs to be apportioned on a reasonable basis,” Dr Morton said.
So let’s say you buy an item that cost $1,000 but you only use it 20 per cent of the time for work.
That means only $200 of it may be deductible.
The tax saving on that deduction with a tax rate of 30 per cent becomes just $60.
So, from an item that cost $1,000, you may only see $60 back in your tax return.
Individuals don’t receive dollar-for-dollar refunds from the ATO for their deductions, even if the item is only used for work. (Supplied: Australian Taxation Office)
It might not even be a deduction
“Taxpayers also need to understand whether their purchases will in fact result in an allowable deduction,” Dr Morton said.
“There are plenty of things we may spend money on ‘for work’, that are really just private expenses and will not be deductible at all.”
Let’s say you buy a thermos, which you only ever use to take soups to work so you can have a healthy, home-cooked and hot meal on a job site with no microwave.
You might think that’s a work expense, but the ATO says that’s not the case.
“You can’t claim a deduction for the cost of items that you use to take your food or drink to work, or use at work, even when travelling overnight,” ATO’s website says.
And then there’s the issue of depreciation
“There is a difference between wanting to claim a deduction and the expense actually being deductible,” Dr Morton said.
For example, a piece of equipment like a laptop would be considered “capital in nature”, she said.
“We therefore have to look at specific provisions within the tax law that prescribe the deduction we can claim,” Dr Morton said.
“It may require the taxpayer claiming only a proportion each year to the extent it has a taxable portion.
“We are talking here about ‘decline in value’, or ‘depreciation.'”
There are a couple of methods that may apply, depending on the taxpayer’s circumstances.
For example, an employee would not be able to claim the cost in full like a small business could.
“Private use comes into play here as well,” Dr Morton said.
“If the taxpayer uses the laptop for streaming movies or social media, they need to apportion any claim they make on a reasonable basis.”
It’s easy to get swept up in the frenzy of end-of-financial-year sales. (ABC News: Michelle MacNamara)
You may also need a receipt
“The taxpayer also needs to substantiate their claims,” Dr Morton said.
“If the ATO audits the taxpayer, it is the taxpayer that has to prove to the ATO their claims are justified.
“A lot of taxpayers have been losing in the courts on the basis of this onus of proof.”
The ATO’s website says you must have “full written evidence to support all your claims” if your total claim for work-related expenses is more than $300.
But even if it’s under that threshold, you still have to be able to show:
- you spent the money
- how you calculated the amount of your claim
This could mean a highlighted bank statement, a written description of each item, and how they directly relate to your work, the ATO’s website says.
Taking photos of your receipts for work-related expenses can make filing your tax return a little easier. (Supplied: Australian Taxation Office)
Stop and think
“The main message I would make here is that unless you need that item, you are still paying for it,” Dr Morton said.
“Tax should not be the core driver of capital outlays.”
Given you’ll still be paying for at least some of the cost, it’s worth considering if buying the item makes financial sense for you.
“The taxpayer is certainly out of pocket,” she said.
“Setting aside the tax implication, is that purchase worth it?”
When can I do my tax return?
You will be able to file your tax return for this financial year (2025-26) from July 1.
But ATO assistant commissioner Anita Challen said it was best to wait a few weeks to allow time for pre-filled data to appear in your income statement.
“By late July, most pre-fill information is available, including wages, bank interest, government payments and private health insurance details,” Ms Challen said.
“Once pre-fill is ready, taxpayers simply need to check the information, add in any missing information, including cash income, and eligible deductions.”
Disclaimer: This is not tax advice; this is for educational purposes only. Taxpayers should seek advice from a registered tax agent or suitably qualified professional.
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