When you ask yourself how much money will I really get back in my tax return what number do you come up with? It turns out, there are a lot of variables to consider especially if you’re running a side hustle, provide rental accommodation or run your own small business. Even if you’re an employee, there are many tax deductions that apply, some you may not have heard about.
It’s no secret that the Australian Taxation Office (ATO) is not set up to give back over-payments of tax, yet every year thousands of Australians gift away their hard-earned money by paying too much tax and nor making all of their eligible claims.
If you make a mistake when you lodge your own tax return, the ATO is very quick to find mistakes. They advertise how they use sophisticated data-matching programs to cross-reference what you claim, but it never works the other way. If they find out you’ve overpaid no contact is made, but if you’re in the red, action is fast and firm.
The ATO claim that ignorance is no excuse if you make a mistake or claim something you shouldn’t have, but the simple fact is that tax is complicated, difficult to understand and time-consuming. If you’ve under-claimed, the ATO won’t offer you back the same consideration even if they know you’re over-paying.
How Much Money Should You Get Back?
Based on the 2021 financial year, the average tax return was $2,800. If you’re not getting anywhere near that amount, it might be time to find out how you can maximise tax time this year.
What Can You Claim?
There are certain base-level claims that every working Australian can make. If you earn a wage or salary or are self-employed it pays to know the minimum claims that are available to every Australian individual.
Pro Tax Tip: Claims do add up. What you might think are only small claims that won’t make an overall difference might slot your income into a lower tax bracket. Assumptions will cost you money.
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Common Tax Deductions
Most people don’t realise the amount of tax deductions they can make. It’s easy to forget expenses throughout the year.
Pro Tax Tip: Record and expense items as they come up throughout the year so that you don’t forget when it comes time to claim!
- Motor Vehicle Expenses: If you use your car for work, or travel between workplaces once you’re arrived at your main office, you can claim petrol, road costs, repairs and maintenance. You’ll need to keep a logbook and can claim using the 72 cents per kilometre method or the actual cost method
- Travel Expenses: Travel costs include trains, bus, plane, taxi fares, as well as meal and accommodation expenses. As well as receipts, you’ll need to keep a travel diary to show the reason for your travel. Don’t forget to apportion private and business costs, even if you’re visiting the same location for both reasons
- Clothing, laundry and dry-cleaning Expenses: You can claim $1 per laundry load if you’re washing all of your work clothes in the one batch, or 50 cents per load if you wash a mix of work and private clothing. Dry-cleaning costs can be claimed as well as repair and maintenance of your work clothing or uniform
- Self-education Expenses: Education costs such as course fees, meals, accommodation, stationery supplies, laptops and computers can be claimed if your course is related to doing your job
- Subscriptions and Union fees: If you need to keep up with market trends, need industry journals and pay out for work-related subscriptions, you can claim. Union fees as well as licenses are a work-related tax deduction
- The Cost Of Your Tax Affairs: Your tax agent fees are 100% tax deductible when you lodge next year’s tax return, as are the costs of managing your tax affairs such as software apps or bookkeepers
- Working From Home: Most people log in extra hours at home for their jobs. Costs such as your phone, internet, heating, cooling, electricity, gas as well as cleaning and repairing your office and office equipment are tax deductible. You might need to keep a work diary to back up your costs and show your working hours
Pro Tax Tip: Some claims that can be made are job-specific, such as sunglasses and sunscreen if your job is outside and in the sun.
READ: 2022 Super Guarantee Explained
What Can You Do To Improve Your Tax Return?
The most common ways to make the most out of tax time is to prove your expense. If you can back up your claims, the ATO won’t have a leg to stand on. You’ll need to provide all of the written proof you can. This includes:
- Receipts
- Tax invoices
- Bank statements
- Legally binding agreements and contracts
- Statements from your financial institutions
- Your income and superannuation statement
- Dividend statements
- Summaries from managed funds
- Tenant and rental records
Pro Tax Tip: Your documents should be in English unless you incur the expense outside of Australia.
A receipt must show the name of the supplier, the amount of the expense, the nature of the goods or service, the date the expense was incurred and the date of the document.
You’ll need to keep your records for five years, but you’re allowed to keep an electronic copy if it’s a clear and true copy of the original if you don’t want to fill up your filing cabinet and spare room with paperwork.
Pro Tax Tip: You can only claim expenses you’ve already incurred. If your claims incur a private portion, you’ll need to portion out what is private and what is work-related.
You must provide written evidence of your claims if they’re more than $300. Expenses of more than $300 might need to be depreciated over a period of years. Your paperwork should include your receipt and depreciation schedule, as well as details of how you calculated your claim for the decline in value of your expense.
Pro Tax Tip: Chat with your tax agent about making concessional payments into your super account. Pre-Tax money paid into you super account attracts only 15% tax, much lower than the average base tax rate of 37%. If you need to get your salary down you can contribute to your super up to the cap of 27,500 annually.
Still need more information? ITP Accounting Professionals are happy to talk about how you can manage your tax affairs and help you achieve a larger tax return no matter what you earn. Reaching out for help might net you a larger tax return than you’ve ever received. Call 1800 367 487 and chat with a friendly professional today.