What is a tax deduction?
Find out what a tax deduction is and how deductions may reduce taxable income when supported by records.
Summary
A tax deduction is an amount that may reduce taxable income if it meets the ATO rules. Deductions usually need to be connected to earning income and must be supported by records.
What this means
A deduction does not mean the ATO refunds the full cost of an expense. It generally reduces the income on which tax is calculated.
The ATO has different rules for different deduction categories, including work-related expenses, working from home, gifts and donations, and other claim types.
Typical actions
- Check whether the expense is deductible under ATO guidance.
- Keep receipts, invoices, and evidence of payment.
- Separate private and income-producing use where relevant.
- Avoid claiming expenses that were reimbursed.
Official ATO sources
Last checked: 24 August 2026
Deductions you can claim
Explains common deductions individuals may be able to claim.
Records you need to keep
Explains records needed to support claims.
Working from home expenses
Explains specific rules for working-from-home deductions.
Related questions
- What records should individuals keep for tax?
- Can I claim working-from-home expenses?
- What is taxable income?
- What is a tax offset?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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