What’s that noise, you ask? Just the sound of millions of Australians frantically preparing their tax returns in the hope of a swift and bountiful rebate. While July is typically considered peak tax season, you don’t have to wait until the end of the financial year to get started. We’re among the highest taxed individuals in the world, so it’s imperative that we understand the deductions available to us before we lodge those all-important returns.
We all know how tax rebates work; you’re only eligible for them in the event that you’ve overpaid in taxes during the previous year. However, it’s also possible to lower your taxable income through various deductions, such as any donations you’ve made to registered charities or any work-related expenses you’ve incurred. While this might seem daunting (particularly if you’re not using the help of a registered tax agent), don’t let a fear of being audited stop you from claiming for what you’re entitled to. These dos and don’ts might help:
Do claim for work-related expenses
For example, an office-based worker couldn’t legitimately claim for sunscreen but a bricklayer could. Ultimately, anything that you spend money on in order to do your job will likely be tax deductible so make sure you keep your receipts handy.
Do claim for an expense that’s used both personally and professionally
Such as your Internet or mobile phone. Keep a copy of your bill so you can easily establish what proportion of usage is personal and professional.
Don’t claim for an expense already reimbursed by your employer
It’s a big no-no and if the ATO catch on you’ll likely have to cough up a $180 fine.
Snap up those EOFY sales
Have you ever wondered why there are so many End of Financial Year sales? Making a work-related purchase – whether it’s just office supplies or even a new laptop – before the end of the financial year means you can include that purchase in your claim, subsequently lowering your taxable income. However, it’s worth noting that you don’t actually get a dollar for dollar return. Depending on your tax bracket, you might be able to claim 46.5 cent back for every $1 you spend, so it’s really only a win if you need to make the purchase in the first place.
Some debt can be good
Any debt you’ve incurred in order to generate an income – such as a mortgage on an investment property – can be tax deductible. So while any investment loans can work in your favour during tax time, the same can’t be said for your credit card bill. Sorry.
Take out private health insurance
If you’re single and earning over $90K (or over $180K collectively as a couple) and don’t have private health insurance, you can look forward to a Medicare Levy Surcharge come tax time. This surcharge can be as much as $1,000 a year, but the good news is that you’re exempt from paying it if you have private healthcare… which, depending on the policy you opt for, can actually be cheaper than the surcharge. It’s a no-brainer really, isn’t it?
If you’re self-employed, struggling or just short on time, don’t be afraid to enlist the help of a professional. 74 per cent of Australians use a registered tax agent and it’s easy to see why; from ensuring you’ve claimed for any deductions you might have missed to liaising with the ATO on your behalf, the tax agent will take the stress out of your return by (accurately) preparing and lodging it for you. Oh, and their fee is tax deductible too.