If you’re like most Australians, you don’t really know to maximise your tax return, leaving money on the table with every return you complete. The average unclaimed deduction sits quietly in plain sight, unnoticed and uncollected, while workers and business owners continue to overpay their taxes without a second thought.
This is why the best part of our job is watching clients’ faces light up when they realise how much money they’re getting back. One client used her unexpected return to finally start the emergency fund she’d been putting off. Another treated himself to a top-of-the-line noise-cancelling headset he’d been eyeing for months. We’ve seen returns used for everything from weekend getaways to new work boots, from bike repairs to special dinners out with the family.
These aren’t life-changing millions. They’re little wins. Extra breathing room. A small reward for staying on top of your financial admin. If you’re keen to maximise your tax return and get yourself one of these little wins, ITP’s accountants are here to help.
This guide will walk you through the essential strategies to:
- Uncover overlooked deduction opportunities
- Decode tax offsets
- Understand credits
- Maximise your tax return
The Australian tax system has a lot of rules. Let us help you wrap your head around them.
How Do Tax Deductions Work?
Tax deductions are expenses you can subtract from your total taxable income, effectively reducing what your before-tax income looks like on paper. In turn, this means you’ll pay less in taxes. For a deduction to be valid, it must be an expense directly related to earning your income and something you can prove with documentation.
Here are the most important factors to keep in mind:
- Deductions reduce your taxable income, not your tax bill
- They must be legitimate work-related or income-generating expenses
- You need proof of the expense
Common tax deductions include work-related travel, home office expenses, self-education costs, tools and equipment for work, and professional association memberships. The Australian Taxation Office (ATO) has specific rules about what can and cannot be claimed, so it’s crucial to understand these guidelines or consult a tax professional.
What Is Taxable Income?
Your total taxable income is any income you derive from your wages or salary, tips, gratuities or other payments for your services, allowances, interest on your bank accounts, dividends and other income derived from investments, bonuses, commissions, pensions and rent. If you are paid cash, the ATO will expect you to declare that as a part of your taxable income.
Let’s say, for example, you earn $80,000 when all of these income sources are combined. If you have $10,000 in valid tax deductions, you’ll only be taxed on $70,000, potentially saving you hundreds or thousands of dollars in tax payments.
Is All Income Taxable In Australia?
Some government payments and pensions—including the disability pension and some education payments—are tax-exempt. It’s important to note that, even if you’re receiving a tax-exempt payment, you’ll need to include the information in your tax return. This is important as it helps the government work out if you’re entitled to extra payments and other entitlements.
What Tax Deductions Can I Claim?
Any expense you incur in the course of earning your income could be a tax deduction, but not every expense will qualify. The ATO allows you to deduct qualifying expenses from your total income before tax is calculated.
By getting familiar with the tax deductions you’re entitled to, you can save hundreds, if not thousands of dollars. Common work-related expenses include:
- Vehicle and travel expenses
- Clothing, laundry and dry-cleaning expenses
- Home office expenses
- Self-education expenses
- Tools, equipment and other assets
- ATO interest—calculating and reporting
- The cost of managing your tax affairs
- Gifts and donations
- Interest, dividend and other investment income deductions
- Personal super contributions
- Undeducted purchase price of a foreign pension or annuity
To claim a deduction:
- You must have already incurred the expense
- The expense must directly relate to earning your income
- You must be able to prove your claim with a record
Australian Tax Rates Have Dropped
Australia has a progressive tax system, which means there is a different percentage of tax to be paid determined by the amount earned.
The Australian Government introduced significant tax cuts that came into effect from 1 July 2024. These changes are designed to provide financial relief amid ongoing cost-of-living pressures, with reductions across multiple tax brackets that mean more money in your pocket.
Key changes include:
- The 19% tax rate reduced to 16%
- The 32.5% tax rate reduced to 30%
- The 37% tax threshold increased from $120,000 to $135,000
- The 45% tax threshold increased from $180,000 to $190,000
To put this into perspective, an employee earning $90,000 could see an annual tax cut of approximately $1,929 from these tax cuts alone. These cuts will be reflected in take-home pay, with most taxpayers experiencing the reduction through their regular payslips from 1 July 2024.
Resident Tax Rates 2024-2025
| Taxable Income | Tax To Be Paid On This Income |
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 16 cents for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30 cents for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37 cents for each $1 over $135,000 |
| $190,001 and over | $51,638 plus 45 cents for each $1 over $190,000 |
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Saving Even More Money At Tax Time
The latest tax cuts are a welcome change that should put more money back in your pocket this tax season. However, that doesn’t mean you shouldn’t worry about maximising your tax return with all the deductions, tax credits, and offsets you’re entitled to claim.
In the below sections, we’ll cover the most common claims, starting with one of the most important aspects of tax law for small business owners to understand.
Instant Asset Write-Off
The Instant Asset Write-Off gives small business owners a strategic way to managing capital expenses and reducing tax liability. This provision allows businesses to claim immediate tax deductions on eligible assets, potentially freeing up cash flow and supporting business growth.
The mechanism is straightforward: You claim an immediate tax deduction for the business portion of purchased assets, whether they’re brand new or second-hand. What makes this provision particularly valuable is its flexibility—you can claim multiple assets, with each assessed individually against the current threshold.
For the 2024-2025 financial year, there’s a temporary increase of the instant asset write-off limit available to businesses with an aggregated annual turnover of less than $10 million. These businesses can claim an immediate deduction for assets costing less than $20,000 that are first used or installed between 1 July 2024 and 30 June 2025.
The $20,000 threshold operates on a per-asset basis, meaning you can write off multiple assets that meet the criteria. Assets valued at $20,000 or more follow a different depreciation path. These will be placed in the small business simplified depreciation pool, with a depreciation schedule of 15% in the first income year and 30% in subsequent years.
Instant Asset Write-Off Provisions 2024-25
Small Businesses:
- Small businesses with an aggregated annual turnover of less than $10 million can immediately deduct the business portion of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2025.
- The $20,000 threshold applies on a per-asset basis, so small businesses can instantly write off multiple assets.
Important Notes:
- Assets exceeding the $20,000 threshold can continue to be depreciated under the general depreciation rules.
- Maintaining accurate records is crucial to demonstrate the business use of any asset claimed.
- The previous temporary full expensing measures have concluded.
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How Tax Offsets Can Maximise Your Tax Return
Most people’s eyes glaze over when accountants start talking about offsets, especially if we pull out acronyms like SAPTO. But offsets are something you should be far more excited about. Imagine finding a crisp $50 note in a pair of jeans you just bought from an op shop. That’s what tax offsets feel like. Unlike deductions, they give you a direct, dollar-for-dollar discounts on your tax bill.
Some tax offsets are designed for specific groups. The seniors and pensioners tax offset helps older Australians. The low income tax offset provides a bit of relief for those earning less. Then there’s the Australian superannuation income stream tax offset—another targeted form of support.
But here’s the catch: eligibility matters. Each offset has its own rulebook, and those rules are constantly changing. Take the low and middle income tax offset, for example. It was a reliable fixture for years—and then it vanished into the night after the 2021-22 income year. A reminder that in the world of tax, change is the only constant.
To ensure you’re always on top of changes like this, you can either check the ATO website or talk to a tax professional. ITP offers free tax advice to clients year-round, and we can help you understand what offsets might apply to your specific situation.
For now, let’s break down what’s available for the 2024-25 tax year and beyond.
Tax Offsets Offered By The ATO
- Seniors and pensioners tax offset (SAPTO): This one’s for our older and wiser taxpayers. Check if you’re eligible, and see if you can transfer any unused offsets. It’s like a buy-one-get-one-free deal, but for tax.
- Superannuation-related tax offsets: Got super? These offsets might be your friend. See if you can claim one for yourself or your spouse. It’s a bit like getting a bonus for saving for retirement.
- Beneficiary tax offset: Receiving certain government payments or allowances? This offset might apply. It’s worth a look, just in case.
- Private health insurance offset: If you’ve got private health insurance, you might be able to claim this offset. It helps with the cost of those premiums. Think of it as a small thank you for being proactive about your health.
- Medical expenses tax offset: This offset was available from 2015–16 to 2018–19. Just a heads up, it’s not current.
- Offset for maintaining an invalid or invalid carer: If you’re looking after someone, you might be able to claim this. It’s for those who care for someone 16 or older. It’s a recognition of the important role you play.
- Zone and overseas forces tax offsets: Living in a remote area or serving overseas? This one’s for you. It acknowledges the unique circumstances of your situation.
- Lump sum payment in arrears tax offsets: Received a lump sum payment that was delayed? This offset might help. It’s designed to smooth out the tax implications of receiving a large payment all at once.
- Claiming a foreign income tax offset: Paid tax on income from another country? You might be able to claim this. It’s all about avoiding double taxation.
How Tax Credits Maximise Your Tax Return
When you lodge an income tax return, tax credits work quietly on reducing your tax burden. For employees, this process begins with every pay cheque. Your employer withholds money and sends it to the ATO through the PAYG withholding system.
These withholdings are essentially prepaid tax credits. When tax time rolls around, these credits sit in your account, ready to offset your tax liability. It’s like having a financial buffer you’ve been building all year without even realising it.
Franking credits deserve special mention. Known formally as imputation credits, these are payments made by companies to shareholders alongside dividend distributions. Australia’s tax system uses these credits to prevent the dreaded double taxation—a bureaucratic nightmare where the same income gets taxed twice.
Here’s how it works in practice. If a company has already paid corporate tax on its profits before distributing dividends, shareholders receive a credit for that tax. This means you’re not getting slugged twice for the same income. Clever, right? If you want to learn more about tax on investment income, including the difference between franked and unfranked dividends, take a look at our guide to paying tax on the sale of shares.
Tax credits are powerful. They reduce your overall tax payable by their full amount. In some cases, they can even transform into a tax refund once your taxable income hits zero. We’ve seen countless clients’ eyes light up when they realise how these credits can work in their favour. A few strategic moves, some careful record-keeping, and suddenly that tax return looks a lot more appealing.
Want To Know The Most Reliable Way To Maximise Your Tax Return?
Tax strategies are never one-size-fits-all. The Australian tax system is incredibly intricate, constantly evolving, and full of nuanced opportunities to save. The problem is that each of those opportunities comes with a whole lot of rules. What works for one business might not work for another, and the same is true for individual tax payers.
ITP’s Accounting Professionals have spent over 50 years helping Australian individuals and businesses understand these intricate financial puzzles. Our aim is always to help you keep more of what you’ve earned. That’s why we offer free tax advice year-round—your success is our success.
Ready to maximise your tax return each and every year? Maybe you’re struggling with your BAS obligations? Or perhaps you’ve got a stack of overdue tax returns stressing you out? Let’s chat. No tax problem is too big for our accountants. ITP’s friendly tax experts are waiting to help you maximise your returns and minimise your stress.