With June 30 around the corner, now is the time to start preparing for the end of the financial year to get the most from a tax return.
Tax time is fittingly a taxing time for many Australians. But it doesn’t have to be.
H&R Block director of tax communications Mark Chapman told The New Daily that managing your taxes can be relatively easily, as long as you’re organised beforehand.
“One of the biggest issues people have when it comes to claiming deductions is that they don’t have the substantiation to prove the expense they’ve incurred, so they can’t claim it,” he said.
“If you’ve got a receipt sitting in a file somewhere, but you’re not quite sure where exactly it is, spend the time to find it, because if you do you’re giving yourself access to the deduction. If you don’t, you’re potentially going to miss out.”
With that in mind, The New Daily took a look at some common tax claims.
Getting your house in order
While renters and owner-occupiers don’t benefit from many property-related tax perks, rental property owners can claim a range of deductions, and Anthony Landahl, managing director of mortgage broking firm Equilibria Finance, said understanding how to apply these is “critical” to getting the best tax outcome.
Accountancy costs, body corporate fees, rates and advertising for new tenants can all be claimed as expenses given they are incurred as a result of generating income.
However, there is a notable caveat to this, Mr Landahl said. For rental property expenses to be deductible, the property they relate to must be genuinely available for rent – saying the property is available but not properly advertising it as such won’t cut it, and the ATO won’t accept the claim.
Take out health insurance
Singles earning more than $90,000 per year (and families earning more than $180,000) who don’t have private health insurance need to pay an additional 1 per cent Medicare levy on top of the 2 per cent levy paid by all taxpayers.
While 1 per cent might not seem like a big sum, Etax marketing communications manager Ashley Debenham said it can be a heftier burden than taking out private health cover, and so it “may be worth a look” to see if a suitable policy is available that could save money.
“Plus, private health cover has some other advantages like shorter waiting times,” Mr Debenham said.
Tax karma for charity
About 60 per cent of Australians over the age of 14 donate money to a charity; it’s a decent proportion of the population but a figure which has steadily decreased over the past few years despite being a “win-win” situation at tax time, according to Mr Debenham.
The reason charitable donations are looked upon so favourably is because not only are they “already a good thing”, Mr Debenham said, but the amount donated can be claimed back as a refund.
“After your donation you should receive a receipt, which you should keep in your tax receipts folder. At tax times, add up the charity receipts and enter the total amount into the charity donations section of your tax return,” he said.
However, donations will only be deductible if they’re made to organisations that are endorsed by the ATO as a ‘deductible gift recipient’, which can be checked by searching the charity through the ABN lookup.
Commonly forgotten deductibles
Mr Debenham said expenses such as business-related phone calls, heating a home office, additional education, travel for (but not to) work, and buying office equipment can be claimed as expenses, though these things are often forgotten.
As long as these expenses are work-related (and there’s evidence to prove the purchase and its legitimacy), they can be included – though there are some caveats.
“It’s also important to remember that checking your emails in the evening doesn’t count as working from home – at least not to the ATO,” Mr Debenham said.
ATO cracking down
More than 2000 people and businesses were prosecuted for tax-related transgressions in 2017-18, with the infractions involved (ranging from failing to lodge their returns to making false or misleading statements) costing those involved a total of $13.75 million in fines.
“We take firm action against people who intentionally falsify information on their tax returns, including penalties or prosecutions in serious cases,” the ATO said.
Mr Chapman said the ATO has a “good eye” for dodgy deduction claims, and warned against “embellishing” any details listed on a tax return document and making sure the expense is legitimate – especially in the case of work expenses.
“Don’t be tempted to claim for something you’re not entitled to or [for which] you don’t have the substantiation,” he said.
“Make sure you’ve sent the money, the expense was legitimately related to your work, your employer didn’t reimburse you and you have the paperwork to prove it.
“If you don’t have all of that, don’t try to claim [the item] because there’s a good chance you might end up being audited.”
Many things that might not seem deductible can sometimes be claimed under the right circumstances, Mr Chapman said.
Some examples of unusual but legitimate deductions that he’s seen include security guards claiming a dog, musicians listing their instruments, and sex workers deducting “equipment” needed for their job.