How to Max Your Tax Without Breaking The Law
Sneaky ways to get more coin from the ATO
Do your tax right and you could very well be looking at a healthy return. The tricky bit there of course is that you will need to do it right. If you’re not entirely sure what that might look like, then read on. We’ve talked to experts in the field and they have provided some tips and tricks that will make the process considerably more simple and hopefully -- see more cash in your pocket.
One word of warning ... There are a handful of rules to follow and when we say that we mean it. The Australian Tax Office does not take kindly to those who attempt to rort the system -- and no, it doesn’t matter if you’re just one person sneaking a few coins here and there.
Indeed, earlier this month, assistant commissioner Kath Anderson said the ATO would be paying close attention to claims for 'other' work-related expenses this year, as last year 6.7 million taxpayers claimed a record $7.9 billion in deductions in that category. All the same -- you are entitled to claim various items on your tax return.
Your Max Tax Guide
Do you use your personal smartphones, tablets or laptop for work? These items can be deducted in full if less than $300 or as a depreciated deduction if more than $300. Software is also deductable, and you can claim repairs.
Don’t forget to claim work calls made from your mobile. If you’re on a monthly plan, simply calculate the percentage that you use for work. A percentage of work-related internet and electricity used while working from home can also be claimed in a similar way.
And in case you're wondering you don’t have to be running a business to claim home office expenses -- you just need a dedicated workspace. “If you’re doing a few hours of work at home each week you can claim a number of items including stationary and desk lamps,” says accountant and financial planner Jason Cunningham. You can even claim heat and/or air conditioning.
Some bank fees connected to your ability to earn or access your income are deductible. If you pay ATM or over-the-counter fees to withdraw your income these are deductible too as are any monthly fees for a savings account that generates income for you. Fees can't be claimed if the account is simply a way for you to pay your bills and other expenses and it doesn't earn interest.
And that's not all
Income protection insurance premiums can also be claimed, although life, trauma and critical illness insurance are not tax deductible. If you're confused about this at all talk to your insurance company who should be able to provide advice.
Donations of two dollars or more are tax deductable. However, you can't claim charity raffle tickets or the cost of attending a fundraising ball so bear that in mind when choosing the charities you’d like to support.
Along with the cost of buying eligible work clothes (work uniforms, protective clothing and occupation-specific clothes), you can also claim the cost of washing, drying and ironing these clothes, whether they’re dry cleaned professionally or you do it yourself. The ATO considers one dollar per full load to be a reasonable deduction. If you work outdoors you can also claim sun protection items such as sunglasses, hats and sunscreen.
Travel expenses usually exclude general commuting costs to and from work, but work-specific travel, such as visiting clients or delivering equipment, can often be claimed.
Don’t buy something with the sole purpose of getting a tax deduction. When you make a claim you don’t get a dollar-for-dollar reduction in tax owed. "On average, you're only going to get back a third of what you actually spend," says Cunningham.
Part Two - Things To Consider
You must have spent the money yourself and the purchase must be related to the income that you earn. The expense must not have been reimbursed to you by your employer once paid.
You need to have proof of purchase. You need receipts if the total of your work-related claims exceeds $300, but that limit doesn't apply to claims for car, meal and travel allowance expenses. When your clothing expenses claim exceeds $150, the ATO requires written evidence such as diary entries and receipts.
You can be audited any time within a five-year period which means keeping all of your receipts for that period of time. To make that process simpler, Cunninghan recommends the ATO’s myDeductions app. It requires you to take a photo of your receipt and then categorise it, which is a bit of an effort but it means you can bin the receipt. Plus, when tax time rolls around you’ll have all the information you need to pre-fill your tax return. If you use a tax agent, it may even work with their software.
A Sneaky Shortcut
If your tax affairs are straightforward, the MyTax return might be an option for you. This online form pre-fills your return with information from your previous tax return, your employer, bank and government agencies by late August. It’s relatively simple and refunds usually come through in two weeks. If you are going to use this system it’s worth noting that the cut-off date is October 31.
If your affairs are more complex, say you have multiple income streams, investments, property, shares or managed funds, an accountant might be a better option. It also gives you more time, as the October 31 due date doesn’t apply. You’ll need to pay for the service but then you can always claim that expense the following year.