financial-investment

Quick Tax Tips

Here are a few short tax filing suggestions if you're an Australian citizen. The fundamentals of tax filing will be covered in this essay. If you had income during the year, you must first complete a Tax Return form.

The important thing to remember is that everyone can take advantage of deductions and credits, regardless of how much they earn or spend in a given year. Before selecting which deductions and credits are ideal for your circumstances, it is always a good idea to speak with a tax law specialist because it may be very complex! Avoid taking more than one deduction at once if you can, as this could result in overclaiming some expenditures.

Knowing your rights and obligations is crucial as tax season approaches in order to avoid fines. The most frequent mistakes people make while filing their taxes in Australia will be covered in this essay.

The advice in this article can help you file your taxes accurately and avoid penalties. It also explains what happens if you end up owing money after submitting your taxes. This article can also assist in addressing your concerns if there is a mistake on your return or if you are unsure of the amount of money needed for the payment.

A Simple Guide To Australian Tax Deductions

Anything you paid for out of your own pocket and can claim as a tax deduction on your tax return.

Your taxable income may be decreased as a result, of increasing your tax refund.

Tax deductions cover business-related charges including the price of clothes, tools, and travel for business.

Since COVID's arrival, more people are working from home, which means that many more people can deduct some costs associated with their home offices from their taxes.

The interest on investments, costs related to rental properties, various insurance policies, and charitable donations are additional examples of deductible expenses.

Do I Receive My Entire Purchase Price Back If I Make a Tax Deductible Purchase?

Simple answer: No is the response. You do receive a portion of the money you spent on tax-deductible goods and services, though not the entire amount. The sum of your expenditures is deducted from your taxable income. As a result, your refund increases and you pay less tax overall.

Tax Deductions: How Do They Operate?

You don't have to be an expert on this, to start with. If you utilize Etax, the website assists you in locating the deductions you may be eligible to claim. Additionally, you can chat with an accountant who is on your side to assist with accurate deductions. Having said that, having a basic understanding of deductions might assist you to recall which receipts to keep track of throughout the year.

You're right if you find this puzzling. Australian tax laws are extremely intricate. Here is a brief illustration of how tax deductions function.

Your tax refund would be $1,133 if you made $65,000 a year and paid $14,000 in taxes. However, if you paid $3,500 in work-related expenses over the course of the year, your taxable income drops to $61,500.

As a result, you only owe taxes on $61,500 of your income, and any additional taxes you paid during the course of the year will be deducted from your refund.

This amounts to $1,260 at the time of writing, which is added to your $1,133 initial tax refund to bring your total tax refund up to $2393. In other words, when you file your tax return, your tax deductions will result in an additional $1260 in a tax refund.

Important Information: The additional tax refund you receive as a result of your deductions is not a set sum. It alters in response to variations in your income. For instance, for a person making $35,000, their $3,500 in tax deductions result in a $735 increase in their refund.

On the other hand, someone making $110,000 would receive a $1,470 return thanks to their $3,500 in tax deductions.

Quick Tax Tips

Here are a few short strategies to help you save time and put more money in your bank account as the end of the fiscal year draws near.

Working from home - If you do, make sure to record your internet usage and working hours in a journal.

Contributions to charities are tax deductible if they exceed $2. Keep all receipts, and make checks payable to the person with the highest income.

Plan your insurance - Income protection is a terrific method to be covered if you are hurt while not at work and it may also be deducted from your taxes. If you are nearing 30 or the Medicare levy surcharge restrictions and sign up before 30 June 2013, private health insurance will also enable you to save money on taxes in 2014.

Income and deductions - The best approach to ensure that the highest earner claims deductions and the lowest earner claim any income is to make sure that both are done. For instance, you can think about putting the name of the person with the lowest salary on a bank account that is earning a sizable amount of interest.

Logbooks - If you keep a logbook to track your driving, be sure it is not older than five years. Logbooks must be kept current.

Claim everything to which you are legally entitled. Do you know what you are permitted to claim? For instance, did you know that if you work out on the road, you can claim sunscreen? Therefore, you might be able to claim it if you own lip balm, foundation, or moisturizer with an SPF rating.

tax returns

Use an EFTPOS or credit card for any tax-deductible expenses - people can now provide evidence of claim through bank statements. Use an EFTPOS or credit card and just keep track of your bank statements if you are not the best at keeping track of your transactions.

Wealth-building techniques -  Have you given borrowing money to buy a house any thought? Purchase shares? These could lower taxes and increase wealth.

Do you have both a mortgage on your home and rental property? You can increase your deduction if you pay interest just on the rental property. If the property is less than 40 years old, you can also deduct depreciation from the building and fixtures.

Capital Gains - If you sold shares or property this fiscal year and realized a capital gain, you might want to think about offsetting some or all of that gain by selling some underperforming shares before June 30.

How To Increase Your Tax Return

Claim as many expenses relating to your job as you can this year

On your tax return, you may be able to deduct a significant portion of the expenses that you incurred while executing the duties of your work. While many people are unable to, you may be subject to a fine from the ATO if you falsely claim that you are eligible for them. Some are also more obvious than others, such as the tools that an apprentice needs or the travel expenses they incur.

Did you know, on the other hand, that journalists might be able to deduct the costs of their pay-TV subscriptions? These expenses can be written off as long as it can be proven that they were directly related to the execution of their work (for instance, a sports writer who needs access to the sports channels). There are an infinite number of things that could potentially be written off as expenses related to your company.

The following are some examples of things for which you might meet the requirements:

  • Tools and attire appropriate for the job. The item is necessary for you to do your jobs, such as special shoes like steel-toed boots or tools used by tradespeople or stylists.
  • Safety equipment Items essential for self-defence or safety while performing your profession, such as sunscreen and sunglasses if working outside is a need.
  • Mobile phones and laptops. If you use these for work, you can deduct them from your taxes. For example, if you have a laptop that you use for both work and personal usage, you can only deduct the portion that is used for work.
  • Conferences and classes. Self-education costs like courses and credentials must be clearly relevant to your line of work and will help you advance or earn more money.

Get Tax Breaks For Working From Home

You are qualified to claim this as a tax deduction whether you work from home full-time, part-time, or perhaps sometimes. For instance, if you run a home-based business (either full- or part-time) that requires the use of computers, phones, and various other electronic equipment, you may be eligible to deduct some of the associated costs from your taxable income. The cost of your household's internet and power bills were accounted for as well in this estimate.

Tax deductions for home-based work may include the following:

  • Cleanup fees. the costs associated with maintaining a home office.
  • Office equipment Costs associated with purchasing and maintaining office equipment necessary for you to perform your work.
  • the telephone bill. Calls made on landlines and mobile devices about work-related issues (you need to receive an itemised bill for your phone calls and mark the ones linked to work)
  • Your internet bill at home. Depending on how frequently you use the internet for business, you may be able to claim a portion of your monthly internet fee.
  • Bills for electricity. Depending on how frequently you work from home, you can also deduct a portion of your electricity costs.
  • Amazingly, if you run your business exclusively out of your home and have a space designated for commercial activity, you can also deduct a percentage of your occupancy expenses, such as rent, mortgage, and home insurance. In order to avoid an ATO fine, you must appropriately claim your working from home expenditures. To support the amount you're claiming, you'll need to provide supporting documentation and calculations. This can be done for you by a tax agent to make sure your claims are legitimate.

Due to the large number of persons working from home, the ATO has created a specific "working from home" tax exemption for the 2020–21 fiscal year. You are able to claim 80 cents for each hour that you worked from home. To make sure you are claiming your home office expenses properly, read our comprehensive guide on how this works.

Use a tax professional—not only will they help you maximise your return, but their fees are tax deductible!

Use a tax professional—not only will they help you maximize your return, but their fees are tax deductible!

  • Using a tax agent to file your tax return is frequently the simplest way to make sure you're deducting everything for which you qualify. Here is how tax professionals may assist you throughout tax season:
  • Make a tax deduction for the cost of the tax advisor. It could come as a surprise to you to realize that paying a tax professional is entirely tax deductible.
  • Obtain extra tax breaks. Tax professionals are familiar with the ins and outs of the tax code, so they can assist you in making all of the claims to which you are entitled, including some to which you may not be aware.
  • Make a true claim. The ATO may impose a fine on you if your deduction claims are incorrect. In order to provide you peace of mind after submitting your return, tax agents will assist in ensuring that you have accurately claimed everything.
  • assistance with calculations Claiming things like transportation expenditures and home office costs can be extremely difficult and time-consuming. It's common to need to keep a logbook or provide proof of employment when determining how much you can deduct. It can save you a ton of time and frustration because tax agents are experts at this.

Vehicle and journey costs

The majority of consumers appear to feel comfortable deducting car and travel expenses from their taxable income. However, making an erroneous claim like travel to and from work or estimating the number of expenses incurred can get you into trouble. It's crucial to confirm if the ATO will recognize your claim as a travel expense for this reason. It's important to get this right because properly deducting these costs can save you a lot of money when it comes to tax season.

If you use your car for business, the following are eligible travel and vehicle expenses:

  • Your car will lose value over time
  • the price of registering your vehicle
  • The cost of your car's insurance
  • the price of running your car, including gas, oil, and maintenance

The following expenses related to vehicles and travel are not deductible:

  • Your car's initial purchasing price
  • Tickets for parking and other fines for speeding

It's possible that you could be entitled to claim expenses related to your vehicle and/or travel if any of the following descriptions fit you:

  • The expense of travelling between two different places of employment
  • The price of getting from your place of business to other places, including customer meetings or project work sites
  • If you must transport large objects for your job, such as ladders or tools, which cannot be left at the office

The following circumstances preclude you from deducting travel or car expenses:

  • Direct travel to and from work is preferable because it is typically considered a private trip.
  • If you have to travel to work because you don't live close to a transportation hub

How to Accurately Deduct Travel and Car Costs

super fund
Mortgage concept by money house from the coins

There are two distinct approaches to deducting the costs associated with your automobile from your taxable income. After going through the options on the list, select the one that appeals to you the most. Again, a tax expert can guide you through the process of accurately deducting these charges, so you won't have to worry about making any mistakes in the process.

method employing a cents-per-kilometer pricing structure. Using this method, you are able to claim a deduction of 66 cents for every mile driven for the purpose of conducting business (as was discussed earlier), with a limit of 5,000 miles per vehicle. The amount of money that can be deducted for each kilometre driven is subject to annual scrutiny and possible changes. For instance, the rate was 66 cents per kilometre in both the 2015–16 and 2016–17 financial income years, and the ATO has not yet provided any updated guidelines. You need to be ready to show the method that you used to compute your business mileage in the event that the ATO asks for more data or evidence.

Method based on a logbook You are able to calculate the total cost of the car as well as the percentage of those costs that were associated with the business. To accomplish this, you will need to keep a detailed record for a total of 12 consecutive weeks. You have a responsibility to record the dates, times, and mileage of each of your journeys, in addition to the total distance travelled.

Don't Forget To Donate To Charities

Before you are allowed to claim a gift or donation, there are only a few items that need to be validated. One of the most common tax deductions that individuals either do not claim at all or claim incorrectly is the child care credit. If all you did was drop some spare change into a bucket at the counter of a convenience store, it is quite unlikely that you will be able to claim this as a tax deduction. On the other hand, if you are one of the many individuals who make consistent donations to a charitable organisation each month, you might be eligible for a tax deduction.

If your contribution meets the requirements that are outlined in the following paragraphs, you should be able to take a tax deduction for it:

  • For instance, does the organisation qualify as a DGR (Deductible Gift Recipient)?
  • Is the gift truly a gift and not something you receive in exchange for a material gain or benefit?
  • Do you have documentation confirming these payments were made, such as a bank statement or a receipt?
  • You cannot give away stuff like clothing and deduct the cost as a charitable donation; the donation must be made in the form of money or another type of financial asset.
  • The donation must be at least $2.

The Australian Tax Office (ATO) does not recognize the following contributions as gifts or donations.

  • Tickets for a raffle or an art union
  • items like pencils and chocolates
  • Attending fundraisers is expensive
  • initiation costs
  • Instead of raising tuition, payments could be made to school building funds.
  • payments that could result in a meaningful benefit for the donor, such as raffle tickets with a chance of winning

Bonus Information: How to Accurately Claim Work Clothes

It's crucial to get this properly because the ATO has recently cracked down on persons who make inaccurate claims regarding work clothes. Your job must specify the type of attire you must wear, and it must be needed. Contrary to popular belief, not everyone is qualified to deduct laundry costs from their taxes. Before deducting clothing from your taxes, be sure it satisfies one or more of the following requirements:

  • It must bear a logo or be listed on AusIndustry's register.
  • That item must be required to be worn according to a strict policy that is enforced. For instance, claiming a deduction for the requirement to wear black is not explicit enough.
  • It must only be used for business-related activities; it cannot be worn for personal usage or outside of work.
  • You must wear the apparel for your protection at work (e.g. safety glasses)
  • The attire is tailored for the job (e.g. black and white checked pants for chefs)

As with all other deductions, it is best to confirm your eligibility with your tax advisor before claiming anything to prevent an ATO fine.

Scroll to Top