As one season ends, another one begins. Tax time is just around the corner, which means it’s time to start looking at the best things you can do to maximise your tax refund. If you’re someone who doesn’t look forward to this time of year, let’s see if these tips can help you and perhaps change your mind.
As the majority of Australians are involved in some form of investing, whether it’s property, cryptocurrency, alternatives or other financial markets, it’s important to look at the tax obligations that come with these assets.
Property – If you have been renting out property or even a room within your property, you’re required to declare the money as income. The ATO provides extensive information on your obligations and deductions that can be made depending on how you’re using the property.
Investment products – For expenses incurred in earning dividends, interest or other investment income you’re entitled to claim a deduction. There are some exemptions however, and you’ll need to see where the product sits.
Cryptocurrency – Regardless of where people are sitting with crypto at the moment, due to its massive plunge, it’s important to be aware of what you’re obligated to report. If you engaged in trading cryptocurrency within the last financial year, you must report your gains and losses. Cryptocurrency falls under capital gains tax, this includes anything you’ve traded (not just cashed out) and the rule also applies to NFTs, reward staking and airdrops. It’s important to correctly declare cryptocurrency transactions (business and personal), as the ATO matches data against digital exchanges.
Foreign Income – Assemble income, capital gains and losses received from overseas must be declared. Of course, in the event that you have paid tax overseas already, you might be entitled to a foreign income tax offset.
Investment Deductions – When it comes to investment income, you can claim deductions against the overall amount for expenses incurred. This does not include exempt dividends or other exempt income. You can however, claim account keeping fees for investment accounts, ongoing management fees, retainers or amounts paid for advice, interest on money borrowed to purchase shares and other related investments. You may also be entitled to claim travel expenses if you attended an investment seminar or similar activities.
Review your deductions
A common mistake that people make when they do their tax returns is failing to ensure they’re making all the deductions they are entitled to. Also, you should never solely rely on the prefilled information that you can automatically generate into your return as it’s not necessarily correct. Some institutions, particularly banks and health funds take a bit of time to send all the information to the ATO.
Have you worked from home over the last 12 months? Even if you have just been on a part time basis, you can claim an array of items, or use the shortcut method provided by the ATO. The shortcut method ends after this financial year as it was introduced during the pandemic as many individuals began working from home. You can use this method if you worked from home and as a result incurred additional expenses as a result, such as electricity and internet. You also need to have a record of the number of hours you spent working from home.
The thing to remember with the shortcut method is that if you choose to go this route, you’ll be unable to make individual claims for expenses as it’s all inclusive. Okay, that’s fine but how does this method work you ask? You simply claim 80 cents per hour for each hour you spent working from home, it’s as simple as that. Upon lodging your claim, you must list it in the description as COVID-19 hourly rate.
If you think you’re better suited to making individual claims on your electricity, internet, phone bills etc, as you’ll receive a bigger deduction, then don’t forget depreciation of your equipment. In fact, did you know you can claim the depreciation of your home office? That’s right, whilst some expenses such as laptops under $300 can be claimed in full, the rest is deducted on a depreciation basis.
Car and Travel Expenses
If you use your vehicle for work purposes you can claim certain expenses such as rego, insurance, depreciation and general expenses including fuel. However, the catch is that you’re using it for work purposes, which means you can’t claim for travelling to your workplace, as that is considered private travel. You can however include trips you make between workplaces, meetings and other events. Furthermore, you’re also entitled to claim accommodation costs for work related trips but if your workplace can fit the bill initially, definitely go for that option.
Put money in a super fund
Did you know that for low income earners, each dollar you put into your superfund, that the government will contribute 50 cents? Also, married couples with a partner making less than $40,000 can receive a $3000 contribution to their super from their spouse. This will result in a tax offset of 18%
Make charitable donations
Giving money to charities or churches not only makes you feel good, it can also reduce your taxable income. Of course, you must ensure that the organisation you’ve been donating to has to have deductible gift recipient status, otherwise you can’t claim it.
Are you a student or currently studying a course for career progression? If so there are a few things you can do to receive a larger return due to expenses incurred from studying. This includes the expenses associated with working from home, textbooks or other publications, course fees, stationary, photocopying and of course depression of equipment. Just remember to keep your receipts and records!
If you’re self educating for the express purpose of career progression then you claim expenses if the end result is focused on increasing your income, gaining qualifications or as part of a traineeship.
See a Tax expert: Not everyone likes to get a tax agent to do their returns, some might believe it’s not worth the fee or they don’t want someone else poking around their finances. However, the benefits of having a tax agent/accountant completing your return affords the peace of mind that everything has been done correctly, calculations are accurate and they know in depth all the deductions you can make. Furthermore, the entire process is tax deductible and they can offer advice for your general finance or budgeting.
Happy Tax Season! And many happy returns 😉