As the end of the financial year has just passed, it's time to prepare and lodge your tax return. Doing your tax return can be a daunting task, but being well-prepared and knowing what you can claim to reduce your taxable income will ensure that you get the maximum amount of money back from the Australian Tax Office (ATO). Need some help? Here are some tips for getting the most out of your tax return this season.
Before You Lodge Your Tax Return
1. Choosing A Tax Agent
If you plan to use a tax agent, ask for their Certificate of Registration, or check the Tax Practitioners Board (TPB) Register before employing their services. Working with a registered and reputable tax agent will ensure that you get the most money back on your tax return. Not all tax agents are good. So, check them on the above link first and check reviews if you can before you commit to them.
Why Do I Need A Tax Agent?
Tax agents have a lot of experience in lodging tax returns, and they are more likely to get it right if you need to lodge something complex. They are also up to date and can understand the tax laws that best apply to you. Also - the best part - they can file your tax return for you, saving you time and effort.
Requirements of A Good Tax Agent
These are the basic requirements that you should be aware of when looking for a tax agent:
- Registration as a Tax Agent with the Tax Practitioners Board.
- Membership with CPA Australia or ICA.
- Available in the next financial year to provide follow up services or financial advice.
2. Keeping Receipts for Work-Related Expense Claims
There are cases where you will be asked by the tax body to show how you arrived at your computations, so you will need receipts and records as evidence of your claimed transactions. It is better to keep more receipts than fewer, as you might need them later. While you can claim up to $300 of work-related expenses without showing any proof - if you claim $300 or more, you do need to keep all of your receipts. The Australian Taxation Office (ATO) recommends that you keep receipts for five years from the date of lodgement.
What Kind of Receipts/Records Do I Need to Keep?
- All payments received, including wage receipts, dividends, rental income, and all income you have earned in your capacity as an employee or sole trader.
- Expenses incurred related to income received.
- Paperwork from the sale or acquisition of assets such as real estate and shares.
- Donations or gifts to charitable institutions.
- Medical expenses for you and your family members.
3. Lodging by The Due Date
For the above list of due dates, you can visit the ATO site here. If you lodge after the due date, you could be liable to pay a penalty. If you're using a tax agent, contact them well ahead of the due date.
What You Can Claim
1.Donations to Charities
If you've donated more than $2 to a charity, you can claim a deduction that's equal to the amount you have donated. The charity needs to be a deductible gift recipient, and you must not have received anything in return for your donation.
2. Home Office Expenses
If you do any work from home, such as checking work emails or having a formal teleworking arrangement, you can claim a tax deduction on your running costs and equipment. This includes internet, phone usage and electricity, as well as your computer, iPad, chairs, desks, and lamps. Many people had to work from home in 2020, and as such, you can use the shortcut method, the fixed-rate method, or the actual cost method. Click here for more information from the ATO about these methods and how to calculate them.
3. Vehicle Expenses
If you use your car for work (other than travelling to and from your workplace), you can have these travelling costs deducted if you provide a logbook and corresponding fuel receipts.
4. Prepaid Expenses
Any expenses you have paid for the following year (next year) can be claimed this financial year, such as income protection insurance, membership fees, and subscriptions to work-related magazines, newspapers, journals, and periodicals.
5. Rental Property Costs
You can claim the costs of your rental property for the period it was rented or available for rent. Any prepaid expenses for next year can be claimed this year, such as council and water rates, body corporate fees, and repairs or maintenance.
6. Small Business Asset Purchases
If you've got an active ABN and run a small business, under new simplified depreciation rules, you can claim an immediate deduction on assets under the following thresholds that were used or installed between the following dates:
- For asset purchases between 12 March 2020 to 30 June 2020, small business owners can claim $150,000.
- For asset purchases from 7.30pm (AEDT) on 2 April 2019 until 11 March 2020, small business owners can claim $30,000.
- For asset purchases between 29 January 2019 to 7.30pm (AEDT) on 2 April 2019, small business owners can claim $25,000.
- For asset purchases before 29 January 2019, small business owners can claim $20,000.
7. Small Purchases
Anything bought for under $300 for work can be claimed, including a portable hard drive, a Bluetooth keyboard, or a wireless router for your home's Wi-Fi network.
8. Medicare Tax Rebate
If you received a credit for medical expenses in your tax return last year, you could claim the offset of up to 20% this financial year, depending on your income and whether you're single or a member of a couple.
9. Private Health Costs
If you have private health insurance and pass the income test, you could be eligible for a rebate, which you may be able to claim as a refund if the rebate was not applied as a discount to your ongoing premiums.
10. Capital Gains Tax (CGT) For Sold Properties
You must declare any capital gains or losses you made on a property sold; the ATO will then determine whether you have to pay any CGT. You can use your capital losses to offset your capital gains.
11. Contributions to Your First Home Saver Scheme
Check out the ATO website for further information about your tax obligations under the First Home Saver Scheme here.
12. Uniform Maintenance Costs
If you are required to wear a uniform to work, you can deduct the cost of dry-cleaning.
13. Union Fees
If you belong to a recognised industry union, you can deduct the cost of your membership from your income.
14. Self-Education Expenses
If the course you undertake will help you to maintain or improve your skills in your current job or result in a pay rise, you can claim certain expenses. These include course fees, textbooks, internet usage, and accommodation and meals. For more information click here.
15. Tax Agent or Lodgement Fees
Tax agent or lodgement fees are deductible, so don’t forget to claim this on your tax return. If you prefer not to pay any fees, you can lodge your return online through the ATO for free. For more information on what you can claim, visit the ATO website.
Other Ways to Reduce Your Taxable Income
1. Build Your Super Savings
If you earn below the Super Co-Contribution threshold, you can build your super savings and reduce your taxable income rate at the same time by accessing the Government Super Co-Contribution. If you personally contribute $1000, the government will further contribute a maximum of $500.
2. Salary Sacrifice to Super
If you haven't reached your yearly super contribution cap, you could salary sacrifice to increase your retirement savings and decrease your taxable income.
3. Delay Your Income
Delaying any income you're expecting in June to July means it won't be taxed this financial year. This could include a salary bonus or capital gains from selling property, shares, or investments.
After You’ve Lodged Your Tax Return
Correcting Mistakes on Your Tax Return
If you realise you've made a mistake after lodging your tax return, you should lodge an amendment as soon as you can. If the amendment decreases the tax you owe, you'll receive a tax refund and won't have to pay anything.
Making the Best Use of Your Tax Refund
If you're lucky to get a decent tax refund, you could use it to reduce any debt you have, saving you hundreds or even thousands of dollars on interest payments.
With these tips in hand, you should be able to comprehensively complete your tax return and get back as much money as possible. And as always, if you’re struggling with debt, call us on 1300 003 328 or place an enquiry – we can help with unsecured debts, and may be able to help you with tax debt, too!