Millions of Australians have still not lodged their tax returns and with tax refunds more important than ever in these financially tough times, it’s essential that when you do lodge, you don’t leave any money on the table that you are entitled to.
So, here’s my guide to getting the best possible refund this year.
Claim what you’re entitled to
If you have spent something as part of your work, and you have the paperwork to prove it, claim it. Amongst the common deductions many taxpayers claim are:
Working from home costs
Working from home expenses are the big deductible item this year, with about 35 per cent of all Australians working full-time from home over the past few months.
To simplify claims, the ATO has introduced a temporary “shortcut method” of calculating additional running expenses allowing those working from home to claim a rate of 80 cents per work hour during the coronavirus crisis.
However, you are likely to get a substantially bigger deduction (up to four times bigger!) if you claim your actual costs for item such as:
The work-related portion of electricity and other utilities for heating and lighting your working area
Costs of cleaning your work area
Work-related portion of mobile phone, home phone and home internet costs
Costs of office furniture such as desks and chairs
Costs of IT equipment such as laptops, tablets and mobile phones acquired for work use (fully deductible if the cost is $300 or less per item or deductible over several years if more than $300).
A tax agent can guide you through your claim.
Costs of using your own car for work
This doesn’t include driving to and from work but it does include visiting clients or suppliers, and driving from one work-site to another
Costs of travelling for work
If you are required to work away from home, and you incur costs on meals and accommodation, those costs are deductible up to the amount you actually spent. If your employer pays you an allowance to cover your traveling costs, that allowance is taxable
Costs of tools and other equipment
Whether it’s the cost of tools if you are a tradie, or the cost of a new computer, laptop or mobile phone if you are office-based, if you spend it, you can claim it, provided it’s used for work purposes (if it’s used partly for work and partly for private use, you can only claim the work-related proportion).
Items costing $300 or less are deducible in full, immediately. Items costing more than $300 are deductible over several years.
If you’re undertaking a work-related course, you may be able the claim the costs of course fees – along with textbooks, accommodation and meals if you study away from home.
You can also claim the costs of computer consumables and home internet as well as depreciation cost of the computer used for studying. Bear in mind these course conditions:
The course must have a sufficient connection to your current employment;
The course must improve specific skills or knowledge required in your current employment;
The course must be likely to result in, an increase in your income from your current employment.
Research by H&R Block shows that 64 per cent of Aussies are uncertain of their entitlements when it comes to what they should be claiming at tax time.
A good tax accountant will be able to tell you exactly what you can and can’t claim, minimising the chances of an audit at a later date.
But don’t embellish deductions...
You can only claim what you’ve spent. So, don’t inflate deductions in order to get a bigger refund and only claim for costs you can prove you spent, by producing an invoice, receipt or bank statement for instance. 1 in 4 Aussies are making mistakes and missing out on refunds when lodging their own tax, with the most common mistakes being
forgetting to keep receipts or records of an expense (34%)
leaving out a portion of income (27%)
and claiming deductions for personal expenses (27%).
Again, your accountant will ensure that all your deductions are legitimate and provable to the ATO.
You must have written evidence to prove your deduction claims if your total claims exceed $300. The records you keep must prove the total amount, not just the amount over $300.
Typically, that will be an invoice or a receipt. For expenses of $10 each or less where the total of these expenses is $200 or less, or where you have been unable to obtain written evidence - for example, for toll or parking fees where you can’t get a receipt – a diary note will be acceptable.
If the total claimed is $300 or less, you need to be able to show how you calculated your claims but you do not need invoices to back it up.
There is a widespread misconception that you can claim $300 worth of deductions automatically, without having to worry about proving them. That’s not the case. If you didn’t actually incur the expenses – and can’t show how you calculated the amount of your deduction – you can’t make a claim.
Don’t forget the basics!
You need to make sure that the basic details (like your name, address and date of birth) are correct and up to date. If you get it wrong, there’ll be a data mismatch and you’re tax refund will be delayed whilst the ATO tries to fix the error.
Make sure you include your bank details on your return also.
Seek tax help
Get your tax return wrong and the comeback is on you, either with a lower refund or ATO penalties.
Most people (70 per cent of all Australians!) find it far less stressful to leave it to an agent like H&R Block to complete their return.
This ensures the return will be accurate and complete, whilst an experienced agent will usually be good at sniffing out obscure tax deductions you didn’t know you could claim. Best of all, the tax agent’s fee is deductible.
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