Deductions are expenses that reduce your taxable income, meaning that you pay less tax. The majority of deductions currently claimed by individuals are work related expenses, such as travel, clothing and self-education. However, the law accommodates for a wide variety of deductions that many people are unaware of. This is why people seek out the expertise of a Sydney chartered accountant or Sydney tax agent. Navado’s Sydney chartered accountants and Sydney tax agents regularly assist clients determine whether their expenses are deductable.
The following formula illustrates how deductions reduce your taxable income, thereby reducing the amount of tax liability:
Taxable Income = Total Assessable Income – Total Deductions
A note of caution should be given. Claiming deductions for non-deductible items or having insufficient documentation to support your deductions can lead to penalties, fines and even jail time in extreme cases. It is crucial to speak to an accountant or tax agent when doing your taxes.
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