With the end of the financial year just around the corner, it is another of those times when you have to work on your taxes. Doing taxes is generally a chore and the attitude many of us have is to do away with it as quickly as possible and revert to some “normalcy”. However, if you fail to do your tax filings with the thoroughness that it deserves, you will likely be leaving hundreds of dollars in tax deductions that you would have otherwise claimed.
Many Australians are already paying too much tax and wouldn’t want to knowingly leave money on the table for the taxman. The Australian Taxation Office has been designed to maximize government revenues. While they carry out thorough audits and pursue unpaid taxes unrelentingly, they will not inform you explicitly if you are leaving money behind in unclaimed tax deductions.
There is another incentive of taking your taxes seriously at this time. If you take action immediately and go through your finances to file for deductions, you are going to receive those deductions a lot sooner instead of waiting for a year. If you have incurred an expense just around tax time, you can claim the deduction for that expense as soon as you complete filing your tax returns for this financial year. If you wait until last minute in July to file for the deduction, you will have to wait for a whopping 12 months to claim that deduction.
Around tax time is generally a good time to pour over your bills and determine where you can get the most out of your money. This is the time to start organizing and tracking your receipts and other records with potentially tax deductible expenses.
Some of the areas that you should focus on include the following:-
Home Office Running Costs
This is one of the most under-claimed tax deductible expenses. Most people don’t just have the time to track every little expense incurred in the running of their home office. If you are unable to track all the running costs for your home office, you can also go with the ATO fixed rate of 45 cents per hour. You can claim the home office expenses even if you only do occasionally shifts at home. If you are working full time from home, there is a wider scope of what you can claim in tax deductions. Some of these running costs include the following:-
- Cleaning costs for the home office.
- Heating, cooling and lighting costs for your home office.
- Cost of computer consumables such as software, phone, internet costs and stationery
- Equipment such as computers, furniture, software and any associated hardware purchased for the home office for less than $300 can be written off immediately.
- Depreciation or decline in the value of home office facilities such as fittings, office computers and equipment. This applicable for items that cost more than $300.
If you are running a home office, you can take advantage of the End of Financial Year sales to take massive discounts on office equipment and get the full write-off if the items purchased cost you less than $300. When calculating your home office expenses and deductions, make sure that you factor in the right proportion of these expenses. The proportion must be based on the amount of time that you have spent working from home along with the floor area of the home office where you will be working.
Prepay Your Bills
Generally, it is more convenient to pay your bills on a monthly or weekly basis. It makes the cost manageable and it is something people are used to. It is the way things are done, ordinarily. You can, however, always claim your deductions a lot sooner if you prepay your bills in a lump sum. If you have some cash spare, consider meeting all your obligations in advance by paying a lump sum and then claiming a tax deduction for this. This will accelerate your tax refunds.
Make the Most of Travel Expenses
This is also regarded as one of the most under-claimed expenses and a potentially area where you can maximize on your tax refunds. Take time to document all the work-related travel and accommodation that you have done over the past financial year. If you received any allowances for these from your employer, include those as income in your tax returns. The key here is to maintain very good records of all your travel expenses. Have a travel work diary where you can document all your work-related travel and accommodation.
Take Advantage of the First Home Super Saver Scheme
The First Home Super Saver Scheme is a new government initiative that helps first time home buyers to save the deposit for their first home purchase through a superannuation fund. Savers can put money into a super and enjoy concessional tax rates, which means the money will be taxed at a lower rate of 15% compared to the tax rate of 45% for the high income earners.
In order to qualify for the first home super saver scheme, you must be at least 18 of age and must not have owned any property in Australia before. You must also live in or intend to live in the property you are planning to purchase through the First Home Super Saver Scheme as soon as possible.
The total amount of money that you can withdraw from your Super Saver scheme to buy a house is $15,000 in any single financial year or an overall of $30,000 across all years. When saving money through the Super Saver scheme, it is important to be cognizant of the contribution cap for superannuation: you are only allowed to put in $25,000 into superannuation per financial year.
To make the most of your super before tax time, ensure that you make a contribution into your super before the end of the financial year. You will subsequently be able to claim a deduction on the contribution when filing your tax returns.
Claim Laundry Expenses
If your work involves putting on some work-wear, you can claim up to $150 annually for the laundry expenses even if these claims are not backed with receipts.
Claim Union or Membership Fees
This is one of the most overlooked tax claims. If you are unionized and pays regular union membership or subscription fees, you can claim these fees.
Claim Accounting Fees
You can hire a professional accountant to prepare your tax returns or look at your books and still include their accountant fees as a deduction.
Income Protection Insurance
Are you paying any income protection insurance coverage outside your superannuation? You can claim this as a deduction this year.
You can make donations to charities just before tax time and claim deductions on any donation worth over $2 as long as you have the receipts to back it up. It is like killing two birds with one stone: you are able to lower your tax bill while making a difference at the same time in the causes that you care deeply about.
Sell losing stocks
The ATO will tax you on capital gains when you sell assets such as shares at a profit. This is through the Capital Gains Tax (CGT). However, if you have shares sitting at a loss, selling them will incur you a Capital Loss and this can be deducted from your capital gains or carried forward to the next tax year in case you have a net capital loss. When deducted from your capital gains, it will lower your tax bill. However, you shouldn’t use this strategy selfishly or unethically by selling losing shares just before tax time and buying them back soon after in the next tax year, a strategy called a wash sale. The ATO is taking a hard stance against this and may cancel your benefits and apply penalties if you are engaging in wash sales to lower your tax burden.
Claiming Technology Costs
If you are using some technology such as a computer for work, you can claim deductions for the depreciation on these assets. A tax agent or accountant Melbourne professional can assist you in working out the amount of the depreciation.
You can also claim the work-related portions of your internet and phone costs if you are doing some of your work from home.