What's a Deduction?

The tax office says that:

When completing your tax return, you’re entitled to claim deductions for some expenses that are directly related to earning your income. You subtract these allowable deductions from your total income to arrive at your taxable income – you only pay tax on your taxable income.

In plain english, this means, if you make money that the tax offices has a right to tax to, you also are able to ‘take away’ amounts that you’ve spent in order to make that money. The take away amount is the deduction. For example, if you were a biscuit shop owner.

(1) Money in from customers from selling biscuits (income)
(2) Money from paying for ingredients, food coloring, workers etc… and things you’ve had to pay for in order to make the biscuits and sell them (deductions)

Next: What's Taxable Income?

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