Finance Your Budget Tax time: How getting on top of your paperwork can net larger deductions

Tax time: How getting on top of your paperwork can net larger deductions

Organising your paperwork now saves rushing around later. Photo: Getty
Twitter Facebook Reddit Pinterest Email

Many Australians grew up watching their parents using a supposedly time-tested method of preparing for tax time.

That’s right, I’m talking about a cardboard shoebox.

Every year, receipts are stowed away to gather dust among a year’s worth of expenses, ready to be dragged out as soon as the calendar hits July.

However, tax experts warn this method is grossly outdated and could affect a taxpayer’s ability to maximise their deductions.

So, is there a better way?

What’s the best way to keep receipts?

There’s no golden rule.

But Xero’s general manager of partner experience global Amanda Newton said the shoebox method is dated as receipts become illegible over a matter of months.

Instead, taxpayers should be using technology that is front of mind.

“These days, the ATO doesn’t require you to actually keep paper copies of documentation for tax purposes, you only need electronic copies,” Ms Newton told The New Daily. 

“Using a camera that’s probably connected to your job or activities you do in business can be incredibly useful at the point of purchase, because you can take a photo immediately and have it for [posterity].”

Apps including Hubdoc and Receipt Bank enable taxpayers to store receipts in the cloud, which can then pre-fill into accounting software or be passed on to an accountant.

Beyond electronic copies, compartmentalising expenses can also limit the guesswork.

H&R Block director of tax communications Mark Chapman said having an organised system can shave hours off the process of lodging a tax return.

“Dividing expenses into categories like fuel purchases, charitable gifts and insurances will make it easier for you or your tax agent to identify expenses and work out your claim,” Mr Chapman told The New Daily. 

Do I need paperwork to prove my taxable income?

Although some workers noticed changes to how their income was filed last financial year, most employers have now moved from the classic payment summary – or group certificate – to Single Touch Payroll.

This means workers’ details should be automatically pre-filled when they access the ATO’s services through MyGov.

However, the ATO says some income statements may not be finalised until July 31, and some small business employees could still find their employer uses electronic or hardcopy payment summaries.

Ms Newton said taxpayers should delay lodging their returns until their income information is available, as lodging an early tax return leaves them vulnerable to delays – or even a larger bill.

“There are some timings employees need to be mindful of, but the process is now more streamlined and less arduous,” Ms Newton said.

“But most employees need to remember they’re not waiting for that prompt from their employer to receive their group certificate.”

I made extra super contributions or donations to bushfire relief. What evidence do I need?

Taxpayers claiming a deduction on donations to charitable organisations (exceeding $2) are only required to provide a receipt, which would have been received when their donation was finalised.

However, the process is different for taxpayers claiming personal superannuation contributions.

Mr Chapman said taxpayers would need to ensure their contributions fit under the lower tax threshold, which depends on:

  • A taxpayer’s age and which financial year contributions were made
  • Whether the contributions are concessional (before tax) or non-concessional (after tax)
  • If they elect to have their excess contributions released from super once the ATO determines tax owing.

“These taxpayers would need to inform their superannuation fund that they intend to claim, and then access a specific form on the ATO’s website that allows them to do that,” Mr Chapman said.

“And if you want to claim superannuation deductions, you need to tick a box on your tax return to say you completed that form and that you’ve lodged it with your fund within the required timeframe.”