If you are in the legal profession, you will be acutely aware that tax minimisation is legal, and that tax avoidance is not. Tax avoidance can attract both civil and criminal penalties, depending on the seriousness of the offence.
However, you can legally minimise your tax by maximising your work-related tax deductions.
The same general tax deduction rules for work-related expenses apply to lawyers as they do to any other occupation or profession in Australia. A tax-deductible, work-related expense must be:
1) paid for by you (and you must not have been reimbursed for it), and
2) directly related to earning your income.
You must also keep records (such as receipts or invoices) to prove any tax-deductible expenses that you claim (in case your tax return is ever audited by the Australian Taxation Office). These records must be kept for five years from the date you lodge your tax return.
It is also important to understand that if part of your expense was for work-related purposes and part was for private purposes, you can only claim the work-related expense portion as a tax deduction.
Car Expenses
You can claim the cost of travelling from your office to:
- attend court,
- visit a client, or
- a second job if you have one
However, it is important to understand that you cannot claim the cost of travelling to and from work.
In limited circumstances you can claim a deduction for the cost of travelling from home to work if you are carrying heavy or bulky equipment for the purposes of your employment duties. There are certain conditions that need to be met to claim this.
Self-Education and Study Expenses
You can claim self-education and study expenses provided that they are directly related to your current employment as a lawyer. For example, professional development activities such as attending training seminars or conferences.
Stationery
If you purchase logbooks, diaries, and pens to use for work, then this can be claimed as a deduction.
Supreme Court Library Fees
Supreme Court library fees that you pay annually can be claimed as a deduction however, you cannot claim a deduction if you only pay on admission to practice.
Travel Expenses
You can claim travel expenses if you need to travel and you are away from home overnight for work-related purposes. Travel expenses you can claim include:
- meals,
- accommodation,
- parking fees and tolls, if it is a work-related trip between two places of work or an alternate workplace on the same day
- fares, and
- any other relevant incidental expenses
Clothing and Laundry Expenses
You can claim the cost of specific legal court attire such as wigs and robes, as well as the cost of cleaning these items.
Home Office Expenses
You can claim the work-related portion of running expenses if you work from home. For example:
- electricity
- internet
- cleaning expenses
- depreciation of home office equipment
- cost of repairs to home office furniture
- cost of logbooks, diaries, and pens that you use for work
You can choose to calculate your home office expenses one of two ways:
1) at a set rate of 52 cents per hour for every hour that you work from home, or
2) a suitable portion of your actual expenses (for example, the additional electricity that you use as a result of working from home).
If you are running your business from home as it is your primary place of business, there are deductions you can claim, however you will need to consider the Capital Gains Tax and the Main Residence Exemption implications associated with claiming these costs.
Phone and Internet Expenses
You can claim a deduction of work-related phone and internet costs if you use your own phone or electronic device. If you also use them for private purposes, you can only claim the work-related portion. If your employer provides you with a phone, you cannot claim this.
Tools and Equipment
You can claim a deduction for tools and equipment if you use them to perform your duties as a lawyer.
You can also claim a deduction for repairs to tools and equipment you use for work. If you also use them for private purposes, you can only claim the work-related portion.
Annual Practising Certificate Fees
The renewal of your annual practising certificate fee is deductible. You can claim a deduction for the cost of renewing your annual practising certificate. You cannot however claim a deduction for the initial cost of obtaining your practicing certificate.
Other Expenses
Other expenses that you can claim as a tax deduction include:
- professional indemnity insurance
- Union and professional association fees
- the cost of professional legal publications
- supreme court library fees
Some Expenses You Cannot Claim
- Admission fees
- Gifts and greeting cards given to clients
- Bar Readers Course
How Wilson Pateras Can Help You
Maximising your tax deductions requires a sensible financial strategy. As specialised accountants for lawyers and barristers, Wilson Pateras can help you.
Contact us for a complimentary consultation on 03 8419 9800 or visit our page here for more information.
