Tips to simplify and de-stress this tax season
The weather is colder, the End-of-Financial-Year sale signs are in the windows – yep, that means it’s almost tax time.
Are you in line to receive a nice refund, or get slugged with an ugly tax payable bill with the ATO?
While everyone wants to know how they can keep more of their hard-earned money in their pocket, the tax return process can seem daunting at first.
Luckily, there are a few tips you can use to maximise the deductions you claim on your tax return, reduce the likelihood of owing money to the tax office and keep stress levels low.
1. Go mobile
Claiming deductions is usually the best way to reduce the overall amount of tax you need to pay (and boost your refund), but to legally claim your deductions you need evidence such as receipt to back up your claim.
Old school tax agents often suggest keeping folders, diaries and logs of receipts, what you spend and how much of your expenses are work-related. This is hard work and can be a nightmare to sort out at tax time.
But it’s no longer the ‘90s and some tax agents have moved with the times, offering simple, easy to use online tax return and tracking tools. The most popular online tax returns are mobile friendly and allow you to snap a photo of your receipt on your phone, and attach it right onto your tax return.
Some even have an app allowing you to save receipts year round so they’re ready to go at tax time. No more lost receipts and missed deductions which means more money in your pocket at tax time.
2. Understand the best way to claim work-related car expenses
According to the ATO, work-related car expense deductions are among the most commonly claimed tax deduction items but the biggest challenge for this tax season might be working out which of the two methods of claiming car expenses is best for you.
For example, if you work in administration and need your car to make several short work trips a day, dropping off items at the post or bank, the cents per kilometre method might work best for you.
However, you can only claim a maximum of 5000km per year using this method so if you use a large vehicle or you drive a lot of kilometres during the year, you could lose out big time.
Using the logbook method, your tax deduction claim is based on your car’s “business use percentage”. That means the percentage of kilometres you travel in your car for business related purposes. Logbooks must include details about every trip you take – not just business related trips – and be kept for 12 weeks in a row. The good news is that IF your business use percentage is consistent, then you only need to fill out a new logbook every 5 years.
The two key things to remember are that you can’t claim car expenses on travel between home and work or vice versa. Also, you can only claim expenses that you paid for yourself. So if you’re employer reimburses your car expenses, you can’t double dip and claim them on your return.
3. Cash in when you work at home
Do you ever work from home out of hours? What about check your work emails from home of an evening or on the weekend or make work related calls on your mobile? If so, it’s likely you can claim at least some your home internet and personal phone expenses as a deduction.
For example, if you pay $60 per month for your internet, and you estimate that 40 per cent of your internet use is for work purposes, that adds up to $24 per month ($288 per year) that you can claim as a deduction on your tax return.
Just remember, if you share the costs with a spouse, partner or roommate, you can only calculate the part of the bill that you actually pay for.
Similarly, if you make work related calls on your mobile phone, estimate the work percentage following the same calculations as above and you’ve got another deduction to boost your refund!
4. Consider using a tax agent
These days, nearly 70 per cent of Australians use a registered tax agent to help prepare their tax return. So if you’re unsure about your obligations or don’t have time to prepare your return on your own, it’s best to speak with a professional.
Whether you decide to go in-store or online, when you work with an agent, you get the peace of mind knowing a professional has helped you get the best possible refund plus, the fees you pay are tax deductible. On your tax return, simply add in the amount you paid your tax agent last year into section D10 – “Cost of Managing Tax Affairs”.
For more information visit www.etax.com.au