H & R Block Basic Course Chapter 4

 

HINTS

 

  • The work-related deductions at D1 to D5 are the real bread and butter of individual tax returns. There is almost certainly going to be work-related deductions in some form on the final exam.
  • Self education is the most important to understand well. You MUST describe, in clear concise English, the connection between the taxpayer’s work and their studies.
  • Remember that self education is a work deduction. The taxpayer’s work must be primary, the taxpayer must be studying at the same time as they are working, and they must be undertaking the study to become more skilled at their current job, and not to enter a new job.
  • Remember: neatness is essential in tax work, and keep reading over the I form, and make sure that you never miss any of the boxes on the front page.

 

 

 
 
 

 

 

 

 

 

 

 

 

 

 

 


Question 1

 

a)     She cannot claim the clothing or laundry because the clothing is sold to the public. This makes it conventional clothing, even though it has the store logo on it, and employees must wear it.

 

b)     No. These are expenses of gaining employment. Even the updating of a resume is not deductible for the same reason. However, updating of (but not the original preparation of) the photographic folio of a model or actor is deductible, as it is an ongoing expense of a person who is self-employed.

 

c)     The purchase of the briefcase occurred before he started work, and a business suit is conventional clothing. He can only claim 1997+39 = 136 at item D5.

 

d)     Next year. The date of payment is what matters, not the date that the invoice was issued.

CORRECTION: The cost of the knife can be claimed this year, because the cost was incurred in this year. A credit card statement (which is acceptable as a receipt) would show the date that the cost was incurred.

 

e)     Since the defence force reserve income is exempt, she cannot claim against it. You can only claim D-item deductions against assessable income. She can claim 63+85 = 147 at item D5.

 

Question 2

 

i)  Receipt, bank account debits, or listing on the PAYG payment summary.

ii) Receipts or diary entry, which must include what the item was, its cost, and where it was bought.

iii) Receipts, or diary entries if each bill was below $10.

iv) One typical month’s diary of hours spent in the home study.

 

Question 3

 

a)     When you sign the tax return you are signing that you can obtain the necessary receipts within a reasonable time. You are not signing that you actually HAVE the receipts at the time of signing. She could get a receipt for the union membership, and the home laundry expense could be claimed.

 

She has now exceeded $300, and so could only claim the dry cleaning if she had diary entries with all the relevant details.

 

b)     He can claim $208 (26c/hr) OR the cost of the desk and chair, whichever is greater. Because the 26c/hr includes decline in value of basic furniture he cannot make a claim for both.

 

c)     He can only claim the shirts and the laundry of the shirts. The education is not claimable as there is no nexus with his current employment.

 

d)     He can claim the medical examination as a work-related expense because it is for license renewal. He can also claim the bus license, provided it is a special license, and not just a day-to-day driver’s license.

 

The prescription glasses could only be included in the medical expenses tax offset (see later), but he could claim sunglasses since he is driving a bus.

 

Question 5

 

a)     NO DEDUCTION. The study is not related to his current work, and will not enable him to do his current work better. It is designed to take him into a new area of employment.

 

b)     YES, DEDUCTION AVAILABLE. The study is clearly related to her current work, and will improve her performance at that work. Always remember: self-education is a work deduction. It must be closely related to the taxpayer’s current work.

 

c)     NO DEDUCTION. Again, the study will take her into a new area of employment. It is not related to her current work as a teacher’s aide.

 

Here is a good example. A general practitioner is studying for a diploma in dermatology. If he is doing it to improve his work performance as a GP the study is deductible. If he is doing it in order to specialise as a dermatologist, it is not deductible.