Can Employees Deduct Work Expenses? (Answer: Very Limited)

Introduction

A question often asked: "I bought a phone for work, paid for my car fuel, and ate out while on duty. Can I deduct all of this from tax?" The short answer: for salaried employees, deductions are very limited — and most daily personal expenses cannot be deducted.

This article explains what salaried employees can and cannot deduct, based on the Explanatory Notes for Form BE and the Income Tax Act 1967 (ITA).

General principle: no general deduction for employees

For employment income (s.13 of the ITA), every item of remuneration/ benefit received must be reported. In the Explanatory Notes for Form BE (BE Notes), there is no general deduction for expenses incurred to earn a salary. The deduction framework for employees is specified — not through a general deduction principle like that for businesses.

Limited deduction 1: entertainment & travel

The BE Notes for YA 2025 state:

This means the conditions are cumulative:

• the expenses are incurred in producing employment income;
• and in the performance of official duties;
• claims are limited to the amount of entertainment allowances included as gross income from employment;
• if the employer reimburses the expenses, they are not a deduction — and they are also not subject to tax.

Limited deduction 2: professional body fees

The BE Notes for YA 2025 also state:

So, membership fees of a professional body (e.g. medical or legal) to maintain professional standing and carry on the employment are allowable as deductions.

What CANNOT be deducted?

Daily personal expenses — for example personal phone bills, car fuel, food, clothing, and the like — do not appear as deductions in the BE Notes for employees.

Don't confuse: allowance exemption vs deduction

There are two different mechanisms:

• Expense deduction (like entertainment/travel above) — deducted from gross income;
• Allowance exemption — certain allowances (e.g. official travel allowances) may be exempt from tax under the Income Tax (Exemption) Order 2009 / the allowance exemption schedule.

Do not combine the two: an allowance exemption is not an expense deduction.

Difference from business: s.33 and s.39

For businesses, the deduction principle is different: under s.33(1) of the ITA, expenses incurred "wholly and exclusively" in producing gross income are deductible, subject to the prohibitions in s.39. A trader can deduct genuine business expenses.

Employees, by contrast, have no such general provision — their deduction list is limited to what is stated in the BE Notes (limited entertainment/travel and professional body fees).

this item still awaits official confirmation from HASiL — check again with HASiL before deciding. notes from research

Frequently Asked Questions (FAQ)

Q. Can I deduct my phone bill for work? A. Personal phone bills are not listed as deductions in the BE Notes for employees. Employee deductions are very limited (entertainment/travel within limits; professional body fees).

Q. Can I deduct my car fuel for going to work? A. No — daily personal expenses such as fuel are not listed as deductions. (This differs from businesses, which are subject to s.33/s.39.)

Q. I receive a travel allowance. Can I deduct travel expenses? A. Entertainment/travel deductions are allowed if the expenses are incurred in producing employment income and in the performance of official duties, limited to the entertainment allowance included as gross income. If the employer reimburses the expenses, they are not a deduction and are not subject to tax.

Q. Can I deduct professional body fees? A. Yes — fees to a professional body to maintain the relevant professional standing and to carry on the employment are allowable as deductions (e.g. professional medical or legal fees).

Q. Are official travel allowances exempt from tax? A. Allowance exemption is a different mechanism from a deduction (under the Income Tax (Exemption) Order 2009 / the allowance exemption schedule). The full schedule and conditions need to be verified — this item still awaits official confirmation from HASiL — check again with HASiL before deciding.

Glossary

• Entertainment (keraian) — hospitality expenses related to official duties.
• Allowance — additional payment on top of basic salary (e.g. travel allowance).
• Professional body fees — membership fees of a professional body (e.g. medical/legal).
• Reimbursement — repayment by the employer of the employee's expenses.
• s.13 — gross employment income.
• s.33(1) — deduction of expenses incurred "wholly and exclusively" in producing gross income (business context).
• s.39 — disallowed expenses (business).
• P.U.(A) 152/2009 — Income Tax (Exemption) Order 2009.