How Can I Get A Bigger Tax Refund?
With 84% of taxpayers expecting a refund, and the average size of rebates last year reaching nearly $3,600, it pays to spend time ensuring you’ve got every detail of your return right.
When you do your tax return each year, do you get the full tax refund you’re entitled to? Are you looking for a bigger tax refund, but don’t know where to start and don’t want to get in trouble with the ATO?
In Australia, millions of people miss legitimate tax deductions. That means people don’t get the tax refund they deserve. Is that you?
Australia’s complicated taxation system includes lots of rules about what you can and can’t claim. Getting tax deductions right isn’t simple,
Do you compare your tax refund to your friends and family and wonder, “How can I get a better tax refund”?
Fortunately, there are lots of ways most Australians can improve their tax refund. Millions of dollars are left in the hands of the ATO every year, lost by taxpayers who simply didn’t make the most of their tax return.
Proper tracking and claiming of tax deductions is the biggest strategy for getting the best tax refund. Along the way—and this is serious—you should not add fictional or inflated claims to your tax return. The ATO has new technology that can find inaccuracies in your tax return, and they are better at this than you could even imagine. But that’s okay—we should all pay our share in Australia, and we can still get nice, fat tax refunds by doing it right.
Australians are being urged to not be seduced into accepting the increased flat rate on offer this tax season.
The Australian Taxation Office has simplified the claims process for the masses forced to work from home during the coronavirus lockdown by boosting the standard hourly rate this financial year from 52 cents per working hour to 80 cents.
But National Tax and Accountants’ Association spokesperson Andrew Gardiner says this will result in hundreds of dollars being trimmed from what the taxpayer is owed.
How to Maximise Your Tax Refund
Be Organised And Claim What You’re Entitled To
Take the time to carefully prepare all your documents like payslips, receipts for work-related expenses, bank statements, logbook entries and summaries of your payments. It doesn’t matter if you’re relying on a tax agent, or doing the work yourself, maintaining a spreadsheet detailing your expenses makes working out your spending more manageable. To ensure accuracy from the beginning, download the Tax Checklist to stay in the know about what to gather to ace your return.
If you have spent money on something as part of your work, and you have the paperwork to prove it, claim it. Common deductions many taxpayers claim include:
- Costs of using your own car for work – although this doesn’t include driving to and from work.
- Costs of travelling for work. If you are required to work away from home, and you spend money on meals and accommodation, those costs are often deductible.
- Costs of tools and other equipment. Items costing $300 or less are deductible immediately. Items costing more than $300 are deductible over several years. Items you could claim include tools for a tradesperson, a laptop for an office worker or even a handbag or briefcase used to carry work papers.
And don’t worry about storing messy piles of paper receipts: the ATO is okay with unedited scanned copies. Just remember to save your documents and receipts for the full five years that the ATO requires.
Ask Your Tax Agent Questions
Do you know every deduction and work-related expense you’re legally entitled to claim on your tax return?
Just ask your tax agent about tax-deductible expenses and what you can claim, because they can often suggest an additional deduction you didn’t know about.
For example, did you know that, unless they’re paid through your superannuation, you can claim your income protection insurance premiums?
You may also be able to claim work-related home office expenses, mobile phone costs, car expenses, union fees, and the list goes on!
Claiming just one extra deduction could mean hundreds of dollars more at tax time, helping you to get a much bigger tax refund. So be sure to ask your tax agent!
For a lot of people, using a tax agent to lodge your tax return is the easiest way to ensure you’re claiming everything that you’re eligible for. Here’s how tax agents can help you this tax time:
- Claim the tax agent fee as a tax deduction. You might be surprised to learn that the cost of using a tax agent is completely tax-deductible.
- Claim more deductions. Tax agents know the ins and outs of the tax system so they’ll be able to help you claim everything you’re entitled to, even things you might not be aware that you’re entitled to claim.
- Claim correctly. If you don’t claim your deductions correctly, you could be hit with a fine from the ATO. Tax agents will help make sure you’ve claimed everything correctly so you can have peace of mind after you lodge your return.
- Help with calculations. Claiming things like home office expenses and car use can be really tricky and time-consuming. You’ll often need to create a logbook or show your working for figuring out how much you can claim. Tax agents are professionals at this so that it can save you a lot of time and stress.
- Offer tax tips. Tax agents can also offer you extra tax tips and tips for organising your finances in general.
Determine Your Tax Bracket
The first way to maximise your tax return is to make sure you work out your tax bracket accurately. Without knowing your tax bracket, you won’t understand the full extent of your tax obligation.
The tax brackets aren’t always the same year-to-year. Take a few minutes to review the individual and married income tax rates from the Australian Taxation Office to get an understanding of where you stand. Once you know your tax bracket, you’ll also be in a better place to review your deductions.
Make a Charitable Payment
Doing good is always something to be proud of, but did you know it could also pay off during tax season? Making a charitable payment is a great way of reducing your taxable income and doing a good deed at the same time.
To help you get ahead in the next EOFY, you could always consider setting up a monthly donation to a charity of your choice. It feels great to give back!
Make Sure You Provide Accurate Information
You can only claim what you’ve spent. So don’t inflate deductions in order to get a bigger refund and only claim for costs you can prove you spent by producing an invoice, receipt or bank statement.
Also, make sure you correctly declare all your earnings, including investment property gains, any foreign income or earnings resulting from cryptocurrency trading. Be careful with your details because the ATO has access to a vast range of data sources to validate the data you’ve provided.
Everything from financial institutions and banks to government agencies can be called upon to clarify your claims. If the numbers don’t add up, the ATO will question your tax return.
Save your receipts with an online tool.
For every work-related purchase you make, it’s important to save your receipts so you can claim the expenses on your tax return. (In fact, not only is it important – it’s the law!)
“I always encourage my clients to download and use simple apps that help you to capture and manage expenses,” Ms Hou said.
“In the old days, people used to keep these in shoe boxes. Thankfully apps make record keeping a lot easier. You can take a photo of the documents and upload them to the cloud.
“Most good apps will integrate with cloud-based accounting solutions such as Xero. This means your accountant can access the information easily when preparing your tax return. Ideally, ask your accountant which apps they use and download one of these.”
“Many people may also have to go out and buy technology, office equipment, furniture, consumables such as paper, and other items to set up work at home. These expenses may also be claimed,” Ms Hou said.
She encouraged people to be diligent with record-keeping and to keep invoices and receipts for tax purposes.
“Invoices and receipts are important for work-related purchases. The more claims you make, the more evidence you need.”
Claim Work-related Mobile Phone Expenses
If you use your mobile phone for work-related calls, then you can also claim a proportion of your yearly mobile phone bill on your tax return.
To work out the proportion of the mobile phone bill you can claim, you’ll need a monthly account statement from a “typical” month and a calculator. Work out the percentage of work-related calls you made, and then claim that percentage of your yearly bill.
Claiming your mobile phone expenses can give your tax return a great boost. If 40% of your calls are work-related, and you spend $660 a year on your phone bill, you can claim $264 of work-related mobile phone expenses on your tax return. For someone earning $60,000, that could mean more than $70 more in your refund!
Easily Overlooked Items
Don’t forget to include expenses associated with car insurance or subscriptions for services that you may need to access in the course of your work such as media accesses.
For workers purchasing items to set up workspaces at homes such as desks, chairs and other items, it is important for wage and salary earners to know that the threshold for instant assets write off is $300.
However, for business owners, including sole traders, the threshold is $150,000, up from $30,000. So for those with available funds, it is a good time to shop if you have the cash.
The ATO is assisting people where they can.
“Higher running costs claims are now allowed,” Ms Hou said.
“The ATO has increased this from 52 cents per hour to 80 cents per hour for running expenses while working from home.
“The ATO has also loosened requirements around workspaces. No dedicated working area is required. Each family member can make a claim through their own return, even though they might be sharing the working space.
“This was not allowed in the past. It is now much easier to claim.
“You only need to keep a timesheet, no other substantiation is required. Importantly the ATO wants to avoid ‘double-dipping’. Expenses must be out of pocket expenses. If your employer reimburses the expenses, then the claim is not allowed.”
Don’t Forget About Charity Donations.
There are just a few things you need to check before claiming a gift or donation. This is one of the most common things people forget to claim, or incorrectly claim as a tax deduction. If you’ve only dropped some spare change in a bucket at a convenience store counter, you’re probably not eligible to claim this as a tax deduction. However, if you are one of the many who make regular contributions to a charity every month, you may be eligible to claim something back at tax time.
If your contribution meets the below conditions, you’re most likely eligible to claim it as a tax deduction:
- Does the organisation have a DGR (Deductible Gift Recipient) status?
- Is the gift truly a gift and not something you receive material benefit or advantage for?
- Do you have proof of these payments in the form of a receipt or bank statements?
- The donation must be in the form of money or a financial asset (i.e. you can’t gift items like clothes and claim the cost as a deduction)
- The gift must be $2 or more.
Below are the contributions that the Australian Tax Office (ATO) does not classify as a gift or donation:
- Raffle or art union tickets
- Items such as chocolates and pens
- Cost of attending fundraisers
- Membership fees
- Payments to school building funds as an alternative to an increase in school fees
- Payments that may provide a material benefit for the donor including raffle tickets which may win a prize
Tax-time Deductions Checklist:
The key to getting the biggest tax refund in the first place is claiming the most deductions. Here are some you may not have considered.
Vehicle and travel expenses – Do you use your car for work? Travel between work in different locations? You may be in luck.
Clothing, laundry and dry-cleaning expenses – The crucial thing here is a uniform that’s ”unique and distinctive”. A company logo helps in this regard, as does an outfit specific to your occupation, like high-vis vests.
Here’s how to claim work clothing correctly.
Work clothing is something that many people claim incorrectly, and the ATO had a crackdown on this in recent years, so it’s important to get it right. It must be specific work clothing that is required for your job and compulsory to wear. Despite what many people think, not everyone is entitled to claim laundry expenses as a tax deduction. Make sure your clothing meets one or more of the following criteria before claiming it as a tax expense:
- It must have a logo or be registered with AusIndustry.
- There must be a strictly enforced policy making that item compulsory to wear. For example, simply having to wear black is not specific enough to claim as a deduction.
- It must be worn solely for work purposes and not worn outside of work or for personal use.
- The clothing is required for your protection at work (e.g. safety glasses)
- The clothing is occupation-specific (e.g. black and white checked pants for chefs)
As with all other deductions, it’s best to check anything you want to claim with your tax agent to ensure you’re eligible and avoid a penalty with the ATO. If you’re looking for a more comprehensive list of tax deductions. *The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don’t interpret the listing order as an endorsement or recommendation from us. We’re happy to provide you with the tools you need to make better decisions, but we’d like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.
Gifts and donations – Organisations need to be classed by the ATO as deductible gift recipients, and you need to have obtained no benefit … for example, raffle or art union tickets don’t qualify. Still, your sponsorship of a Movember participant will. You need to have donated $2 or more.
Home office expenses – Provided expenses relate to work and are not for private use. You could claim costs for your computer, phone or other electronic device and running expenses like internet service.
Interest, dividends and other investment deductions – Not just interest you’ve paid. Still, you could also claim account fees, the cost of investing magazines and subscriptions, internet access and depreciation on your computer.
Skilling-up expenses – An investment in your next career is an investment in yourself – and not tax-deductible. However, suppose you’re studying something related to your current job. In that case, you should be able to claim course fees, textbooks, stationery, internet, home office expenses, professional journals, student union fees and some travel.
Tools and equipment – A bit like the last one, if you shell out for tools or equipment to help earn your income, you’ll be able to claim some or all of the cost. For instance, office equipment, safety equipment and protective gear (including sunscreen, sunglasses and hats if you work outside).
ATO tax rules change every year. Getting the best tax refund and avoiding ATO trouble isn’t easy on your own.
At Bookkept, like your Tax Agent, it’s our job to help you claim the maximum possible deductions to get the best refund that you’re entitled to.