Tax time: What you can and can't claim 2:34
IT’S time to tackle tax. Group certificates have arrived, shoeboxes are full of receipts and tax agents are clamouring for your business.
More than three-quarters of taxpayers receive a refund each year, worth an average $3600, but many miss out on more money by failing to claim everything they should.
Do your homework. More than three-quarters of taxpayers receive a refund each year, worth an average $3600, but many miss out on more money. Picture: Supplied. Source: Supplied
2. HIGH-SPEED RETURNS
ATO assistant commissioner Graham Whyte says myTax was launched last year and helped some users complete their tax return in 20 minutes. It automatically includes your financial data supplied by banks, employers and government agencies. “People can do their tax return in their pyjamas at home if they like,” Mr Whyte says.
3. KNOW THE RULES
The ATO has a mountain of information online about what you can and cannot claim, including specific guides for certain occupations, first-time employees and investors. Spending 20 minutes exploring ato.gov.au can give you plenty of new knowledge.
4. KNOW YOUR SPENDING
Go back through credit card statements and other bank accounts to search for any transactions that may be tax deductible. Every dollar you claim puts money back in your pocket.
5. WHAT YOU GET BACK
Remember that the entire tax deduction won’t be returned to you — only the percentage equal to your tax rate. For example, if your taxable income is between $37,001 and $80,000, your marginal tax rate is 32.5 per cent plus the 2 per cent Medicare Levy, so you’ll get 34.5c back for every dollar of tax deductions you make.
Keep receipts. Go through your bank accounts and credit card statements for any transactions that may be tax deductible. Picture: iStock Source: istock
6. ACCOUNTANTS AREN’T WIZARDS
Tax accountants can’t conjure a big tax deduction if they don’t know what you spent your money on and you can’t prove you spent it. You are wasting your and their time if you visit them unprepared.
7. KEEP EVERYTHING
Receipts and other records are vital. For some people, the shoebox still works, while smartphone technology allows people to take photos of receipts. Finance commentator Justine Davies says it’s a good idea to keep digital copies. “The ink on most receipts fades, so be sure to scan them and keep a copy,” she says.
8. ‘APPY WITH TECHNOLOGY
Harness the power of technology. The ATO’s app allows people to record their receipts and other deductions with photographs, check the progress of their tax return and create a motor vehicle expense logbook. Its website has lots of calculators, while many accounting firms and tax agents also have online tools, checklists and calculators.
9. GENEROSITY REWARDED
You can claim a tax deduction for donations of more than $2 given to most charities. More people are donating online to workmates’ causes, so check your emails to see if you made any donations during the year that you have forgotten.
Research. The ATO has a mountain of information online about what you can and cannot claim, including specific guides for certain occupations, first-time employees and investors. Picture: Supplied. Source: Supplied
10. MONEY IN YOUR DRIVEWAY
If you used your car for travel between different workplaces, carrying bulky goods for work or attending conferences, you can get some money back. There are several ways to claim motor vehicle expenses and they vary in complexity, but the simplest is the cents per kilometre of work-related travel at about 65c per kilometre. However, you can’t claim for private travel to and from work.
11. HOME IN ON DEDUCTIONS
People who work from home — even if it’s only a few hours at night or on weekends — can claim deductions for a wide range of home office expenses. Ms Davies says these include stationery, computers, printers, software, office
furniture, cleaning costs and a portion your energy and phone bills. “You can only claim the portion of these costs that specifically relate to work,” she says.
12. GET IN EARLY
Individuals’ tax returns aren’t due until October 31 but if you’re among the majority who will get a refund, why wait until then? The extra cash is better working for you than sitting at the ATO waiting to be handed back.
13. PERILS OF PRE-FILLING
While the ATO pre-fills your online return with bank interest, wages, share dividends and other data, it’s your responsibility to make sure it’s correct. In previous years people have had to wait several months for some investment fund data to flow through. Last year the ATO processed 450,000 amendments, usually for taxpayers who didn’t declare income.
Who will do your tax. You can either do it yourself for free or go to a professional. Picture: Supplied. Source: Supplied
14. EYE SPY
Cheating on your tax return will cost you. The ATO’s data matching technology compares your claims with the correct figures supplied electronically by financial institutions and government agencies. H & R Block director of tax communications Mark Chapman says incorrect claims must be repaid with annual interest around 9.5 per cent. “If the ATO believes that the taxpayer has acted carelessly, a penalty between 25 per cent and 95 per cent of the tax avoid may also be charged,” he says.
15. TAKE AN INTEREST
You must report any bank interest you received, but don’t forget to claim tax deductions for interest on investment loans for shares or property. Even if the interest gets added to your loan principal, you still paid it for tax purposes.
16. APPRECIATE DEPRECIATION
Property investors can grab a wide range of deductions, but the most lucrative is depreciation of fixtures, fittings and an annual deduction of 2.5 per cent of the building cost. It can add thousands of dollars to a tax refund and you don’t spend a cent to get it. Investors should get a depreciation report from a quantity surveyor — their fee will be more than covered by the extra money they get you.
Be honest. Cheating on your tax return will cost you. The ATO’s data matching technology compares your claims with the correct figures supplied electronically by financial institutions and government agencies. Picture: Supplied. Source: Supplied
17. SHARE THE LOVE
Dividends from shares usually come with attached tax credits for the 30 per cent tax already paid by the company. It’s great news for retirees and others who pay lower or zero tax. These franking credits can be refunded, and you can apply for them online, over the phone or with a paper form.
18. A FREE KICK
If you total claims are under $300, you do not need to keep written evidence for certain work-related expenses. However, the ATO says it “may ask” you to explain why the claim is reasonable. Experts say many taxpayers send in their returns with zero deductions despite this small lodgement loophole.
19. NO DOUBLE-DIPPING
The ATO has warned it is keeping a close eye this year on workers who double dip with their tax deductions. If your employer has reimbursed you for phone costs, meals or other items, you cannot claim a deduction for that spending.
20. AFTER YOU FILE
Don’t worry if you discover a small error after you have filed your return, as it’s now easier to get it sorted out. “For the first time this year, people are able to lodge amendments to their tax returns for 2015,” the ATO’s Mr Whyte says. You can check your tax refund’s progress online, and expect it to take at least a couple of weeks. “We work to a service turnaround of 12 business days,” he says.
It’s that time of year again. Tackle tax time with extra knowledge and reap the rewards. Picture: Supplied.