When you do your tax return each year, do you get the full tax refund you're entitled to? Are you looking for a bigger tax refund, but don't know where to start and don't want to get in trouble with the ATO?
In Australia, millions of people miss legitimate tax deductions. That means people don't get the tax refund they deserve. Is that you?
Australia's complicated taxation system includes lots of rules about what you can and can't claim. Getting tax deductions right isn't simple, but there are ways to get help and get it right.
How do tax refunds work in Australia?
Around 14 million people lodge a tax return each year in Australia and of those who receive a refund (about two-thirds) on average they receive just over $4,000 each, resulting in a collective refund of more than $3 billion. So it definitely pays to make sure you're doing everything you can to maximise your refund.
You need to lodge your tax return by the 31st October (or you may be eligible for an extension beyond this date if you are registered with a tax accountant by 31st October). The return will take approximately two weeks to process – your agent can track the progress of your return for you.
COVID-19 will not change these dates or the standard procedure for lodging your tax return. This year, you may receive a larger tax refund this due to the Low and Middle Income Tax offset, available to many taxpayers.
How to maximise your tax return?
Here are our top tips for maximising your refund this year, and getting it back ASAP:
BE ORGANISED AND CLAIMED WHAT YOU'RE ENTITLED TO
The Tax Office is a big fan of paperwork to back up any claims you make. So pull together all your receipts and invoices as well as payment summaries and bank statements. Then sit back and relax, and knuckle down to tackle your tax return.
Take the time to carefully prepare all your documents like payslips, receipts for work-related expenses, bank statements, logbook entries and summaries of your payments. It doesn't matter if you're relying on a tax agent, or doing the work yourself, maintaining a spreadsheet detailing your expenses makes working out your spending more manageable. To ensure accuracy from the beginning, download the Tax Checklist to stay in the know about what to gather to ace your return.
If you have spent money on something as part of your work, and you have the paperwork to prove it, claim it. Common deductions many taxpayers claim include:
Have you travelled to work?
The taxman doesn't let you claim the cost of travel between work and home. But that doesn't rule out being able to claim work-related travel altogether. If you travel between different sites, say, from a head office to a separate branch office, or if you visit clients, the cost may be tax-deductible. If you hold two jobs, the cost of travel between each workplace can normally be claimed on tax.
Costs of using your car for work – although this doesn't include driving to and from work.
Costs of travelling for work. If you are required to work away from home, and you spend money on meals and accommodation, those costs are often deductible.
Costs of tools and other equipment. Items costing $300 or less are deductible immediately. Items costing more than $300 are deductible over several years. Items you could claim include tools for a tradesperson, a laptop for an office worker or even a handbag or briefcase used to carry work papers.
And don't worry about storing messy piles of paper receipts: the ATO is okay with unedited scanned copies. Just remember to save your documents and receipts for the full five years that the ATO requires.
DETERMINE YOUR TAX BRACKET
The first way to maximise your tax return is to make sure you work out your tax bracket accurately. Without knowing your tax bracket, you won't understand the full extent of your tax obligations.
The tax brackets aren't always the same year-to-year. Take a few minutes to review the individual and married income tax rates from the Australian Taxation Office to get an understanding of where you stand. Once you know your tax bracket, you'll also be in a better place to review your deductions.
MAKE SURE YOU PROVIDE ACCURATE INFORMATION
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.
Also, make sure you correctly declare all your earnings, including investment property gains, any foreign income or earnings resulting from cryptocurrency trading. Be careful with your details because the ATO has access to a vast range of data sources to validate the data you've provided.
Everything from financial institutions and banks to government agencies can be called upon to clarify your claims. If the numbers don't add up, the ATO will question your tax return.
Be honest about your income
Okay, claiming everything you're entitled to makes sense. The flipside is that the taxman wants to know all about the income you've earned. Interest on savings accounts, dividends on shares and even capital gains on the sale of an investment – it's all got to go in your tax return.
The Tax Office uses a data matching process to identify overlooked income, and along with a 'please explain' from the taxman, you could be handed penalty charges and interest on any unpaid tax.
Create a Receipt System
If you're stuffing your receipts into a hidden drawer or a giant envelope, you're not alone. That being said, there is a better way. Receipts are very easy to lose, so you have to establish a system. Also, sometimes the ink can fade over time, and you end up with a blank piece of paper!
Tracking and saving receipts is one of the best ways to save money during tax season. You'd be surprised just how many things you can claim that you might not have even known about.
Moving forward, you should try to file away every relevant receipt and talk to your accountant to find out exactly what you're able to claim. Thankfully, there are now apps available that help you to digitise receipts if you prefer a modern solution to keep them safe.
DON'T RELY ON PREFILLED DATA FROM THE ATO
You can prefill lots of your income information straight from the ATO's systems. But don't assume this income data is correct or complete. Many third parties, such as banks, don't pass information about you to the ATO until late July or early August so early lodgers who use the ATO's myTax system will often find lots of data missing from their prefill.
If you omit income and get questioned by the ATO, the legal burden is on you, even though you've taken the information straight from the ATO's systems.
Most tax accountants won't rely on pre-filled data but work from your source documents. This minimises the chances of missing income data for those who prefer to lodge early.
WORK EXPENSES - KNOW WHAT'S AVAILABLE
If you spent money in the process of making money, a whole range of work-related costs could be claimed on tax – everything from sunscreen for outdoor workers to the cost of laundering professional uniforms. Check out the Tax Office website for a virtual A-Z of tax-deductible expenses.
You'll need receipts for individual costs if the total of your work-based expenses comes to more than $300, and remember, you can't claim back costs that have already been reimbursed by the boss.
DON'T OVERLOOK WORK FROM HOME COSTS
One in three Aussies spends at least part of their week working from a home office. If that sounds like you, chances are you may be able to claim at least part of
your phone, internet and power costs and maybe depreciation of equipment like a desk and chair.
If you're not sure how much you're entitled to claim, jump onto the Tax Office's home office expenses calculator.
If you're happy to prepare your tax return, the government's online lodgement system 'myTax' has been upgraded while the older e-Tax has been put to bed.
Even better, myTax prefills plenty of information – like wage and salary payments and interest earned on savings accounts. It can speed up the time taken to complete your tax return and fast track delivery of your refund.
With most of us trying to fit more and more into our 9-5, we need services to work around us. During tax time, life can be even more frantic, and that's why we work outside business hours so you can get your tax done and dusted by lodging online or in person at any of our 470 offices.
To get access to an expert online, use our Online Tax Adviser and get your return lodged ASAP. After you've carefully reviewed all your relevant details and tax documents, upload them, and an Online Tax Adviser will get busy getting your return ready to maximise your refund. As they work, our expert will contact you via our secure and safe online platform so that you can stay up-to-date with how your return is progressing. Or if you're a little more comfortable in the driver's seat, you can opt for our self-service Online Tax Express Return and lodge anytime, anywhere.
CLAIM WORK-RELATED MOBILE PHONE EXPENSES
If you use your mobile phone for work-related calls, then you can also claim a proportion of your yearly mobile phone bill on your tax return.
To work out the proportion of the mobile phone bill you can claim, you'll need a monthly account statement from a "typical" month and a calculator. Work out the percentage of work-related calls you made, and then claim that percentage of your yearly bill.
For step-by-step instructions on claiming mobile phone costs, read this article on calculating your mobile phone tax claim.
Claiming your mobile phone expenses can give your tax return a great boost. If 40% of your calls are work-related, and you spend $660 a year on your phone bill, you can claim $264 of work-related mobile phone expenses on your tax return. For someone earning $60,000, that could mean more than $70 more in your refund!
HERE'S HOW TO CLAIM WORK CLOTHING CORRECTLY
Work clothing is something that many people claim incorrectly, and the ATO had a crackdown on this in recent years, so it's important to get it right. It must be specific work clothing that is required for your job and compulsory to wear. Despite what many people think, not everyone is entitled to claim laundry expenses as a tax deduction. Make sure your clothing meets one or more of the following criteria before claiming it as a tax expense:
- It must have a logo or be registered with AusIndustry.
- There must be a strictly enforced policy making that item compulsory to wear. For example, simply having to wear black is not specific enough to claim as a deduction.
- It must be worn solely for work purposes and not worn outside of work or for personal use.
- The clothing is required for your protection at work (e.g. safety glasses)
- The clothing is occupation-specific (e.g. black and white checked pants for chefs)
As with all other deductions, it's best to check anything you want to claim with your tax agent to ensure you're eligible and avoid a penalty with the ATO.
THINK BACK TO CHARITABLE DONATIONS
Tax time is when the feel-good factor of charitable giving can kick in. Donations of $2 or more to registered charities are tax-deductible. You'll need a receipt for large gifts but if you've handed some loose change to a street collector you can still claim the donation without a receipt as long as it's less than $10. Don't forget to include donations for any workplace giving programs your part of.
PUT YOUR MONEY IN A SUPERFUND
Super contributions might be one of the best ways to make the most of your tax return. This is especially true for workers who earn less than $52,000 a year. For each 1$ put into your super, the government will contribute 50 cents.
Besides, if you're married and one partner makes less than $40,000, the higher-earning partner can contribute up to $3000 to the lower-earning partner's super fund. This results in a tax offset of 18 per cent. This is a kind of saving that pays off in the long run!
REVIEW YOUR DEDUCTIONS
Although this seems like one of our more obvious tax return tips, it's surprising how many Australian workers fail to claim their deductions. There are all kinds of things that you can claim during tax season, such as:
- Business travel
- Work training events
- ATO interest
- Educational courses
- Work-related supplies
The list goes on, so be sure to check with ATO to see what you qualify for. Besides, working with a tax specialist can help you claim all of your possible deductions.
GET PAID TO READ NEWS AND MAGAZINES
Do you read an industry magazine or journal online? You might be entitled to a deduction. If you subscribe to an online or offline publication that helps you stay up to date in your line of work, and you can show a direct link to the subscription and your assessable income, then it's highly likely you can claim a deduction.
For example, a chef or Maître d' subscribing to a food magazine, or a writer or journalist subscribing to online news sites would both cut. The good news is if the subscription cost you less than $300, you can claim an immediate deduction.
GET EXPERT HELP
Get your tax return wrong, and the comeback is on you, either with a lower refund or ATO penalties. Most people (74% of all Australians!) find it far less stressful to leave it to an agent to complete their return. This ensures the return will be accurate and complete, whilst an experienced agent will usually be good at finding obscure tax deductions you didn't know you could claim.
Plus, our maximum guaranteed refund means we go all out to ensure our paperwork is in top shape. In the rare case, you discover you're due a different refund amount, and we'll repay your preparation fee, as well as file an amendment with the ATO. After you've lodged – login online for an update on how your return is progressing; access from anywhere means tax time is less of a stress.
Ask your tax agent questions
Do you know every deduction and work-related expense you're legally entitled to claim on your tax return?
For most of us, the answer to this question is "no". That's why most Aussies use a tax agent – more than 74% use an agent like Etax.com.au, according to ATO figures.
Just ask your tax agent about tax-deductible expenses and what you can claim, because they can often suggest an additional deduction you didn't know about.
For example, did you know that, unless they're paid through your superannuation, you can claim your income protection insurance premiums?
You may also be able to claim work-related home office expenses, mobile phone costs, car expenses, union fees… the list goes on!
There are ways to boost the tax refund you get back from the government. It's all about optimising your deductions, claims and credits. Even your filing status can get you a bigger refund. If you're trying to get the biggest refund you can, make sure that you use the best tax filing software you can. A good tax service will help you get every deduction and credit that you qualify for. It will also guide you through the process so that you don't have to feel lost or confused as you work through your return.