How to maximise your tax refund this year
Australians may be planning to batten down the financial hatches this year by using their tax returns to reduce debt, but the question remains – how to get the most money back from the tax man. Homeloans recently conducted its annual tax refund survey, which found that more tax refund dollars will be spent to reduce credit card debt and mortgages than anything else this year, not to mention bolster savings.
POLL: WHAT DO YOU PLAN TO DO WITH YOUR TAX REFUND?
- Be sensible (put it on my mortgage / pay down debt such as credit cards) (73%, 35 Votes)
- Go on a great holiday! (17%, 8 Votes)
- Splurge! (go on a spending spree / new car) (10%, 5 Votes)
Total Voters: 48
“It appears Australians have increasingly conservative plans for their tax refunds this year,” says Will Keall, Homeloans’ national marketing manager. “Our annual survey examines Australians’ expectations and behaviour regarding their annual tax returns – and there’s consistently a clear trend towards debt reduction and savings. And in 2016 it seems even more people are being cautious with their money and choosing to reduce personal and household debt.”
Accountant Brad Callaughan of Callaughan Partners offered the following thoughts to help taxpayers achieve their goals by knowing how to prepare for this year’s tax time and maximise their entitlements.
“As with everything, planning or being organised is the best way to get the most out of your tax return at the end of the year,” he says. “The major thing I see from new clients is not keeping receipts that they could have claimed because they were never told what they were entitled to. I always tell my clients to keep the receipt and ask me at the end of the year if they are unsure if they claim it, most of the time they are surprised that they can claim it.”
Brad says there are different expenses you can claim, depending on your occupation. But he adds that some common missed tax deductions include:
- Tax agent fees
- Travel to your tax agent
- Travel for work related things, like seminars or collecting supplies or doing the banking/mail run.
- Dry cleaning
- Salary sacrifice before 30 June
- Home office expenses
- Sun protection items like sunglasses, hat, sunscreen
- Professional education, seminars etc
- Professional membership and subscriptions including union fees
- Telephone and internet expenses, briefcase or laptop bag, car wash, income protection, meals allowance, parking and tolls for work related travel or meetings, first aid course
For clients with investment properties, Brad says there are some tax deductions they sometimes miss including:
- Travel to inspect
- Pest control
- Repairs or maintenance
- Garden and lawn maintenance
- Cleaning cost at end of lease
- Bank fees
- Internet usage
- Stationary and postage
- Computer software that is used to track income and expenses
Refund or no refund
This year’s Homeloans survey found two thirds of respondents expected to receive tax refunds. “I would say the average [refund] is around $2,000, but depending on their job and tax deductions and if they have a rental property that average would go to $6k,” Brad says.
Those who do get money back from the tax man plan to put their tax refund on their mortgage (26%, up from 21% in 2014), while 38% will pay down other debt such as credit cards (compared with 33% in 2014). Brad said he would always advise clients to pay down personal debt with the refunds “but I think most are spent on living, holidays and paying off credit cards. I would think this year, we would see a move for people to use their refunds more wisely, given the state of the economy and for that people have had to stretch themselves to buy a house and would be very keen to reduce their debt.”
Also up is the percentage of those who plan to invest or save the money (from 21% last year to 30% this year). And those who expect to receive a tax refund are choosing to wisely pay off debt rather than use their tax refund to splash out on a holiday (it’s down by 18% compared with the 2015 survey), or renovate their home (30% decrease).
While the survey found a continuing trend of expectations of larger refunds, Brad says he hasn’t seen a change in the average refund. “The refund is based on your job income and tax deductions or negatively geared property,” he says.
Brad added that more people were claiming home technology as work related expenses. “I’m finding more people are working from home, so they are claiming home office expenses. I think it is the way businesses are moving towards being more flexible and doing whatever to attract and keep good staff.”
Education is key
He says part of his job is to help and educate clients with what they can and can’t claim and help them to make sure they can be more organised for the next year. “To help, I developed a free app to show examples of what you can claim, to help track expenses and calculate your tax and then email it to me to prepare,” he says.
“The big thing I often see, is people who get a couple of years behind [with their tax returns] and they think that it is easier to not do anything or they are missing something. All I can say is just do it. Make a start, give your accountant what you have. If you are missing a group certificate, chances are we can find it on the ATO portal. So just make a start. The ones I have done this for got incredible refunds, which they could have had earlier to spend on what they want. Also, most of the time we can help you avoid the ATO fines, or if you have to pay the ATO we can help you enter a payment arrangement that fits your budget.”
Learn more about what fellow taxpayers are doing by reading our Annual Tax Refund Survey here.
Many thanks to Brad Callaughan for his assistance in preparing this article.
Visit callaughanpartners.com.au for more information.