It’s nearly tax time and over the coming months, 13 million Australians will be lodging a tax return and the majority of them will be expecting a refund of some sort.
In some good news, many Australians will get a bumper tax return this year due to the Low- and Middle-Income Tax Offset and also the change in tax thresholds from 1 July 2020. This could come as a pleasant surprise as the impact of both measures could mean they are actually due a refund, or at the least a decrease in their tax liability.
The average size of tax refunds last year reached over $3,000, so it pays to spend a little time and effort ensuring you’ve got every detail of your return right at tax time.
So what are my top tips for getting your return right this year?
- Claim what you’re entitled to…
You’re entitled to claim a deduction for any expense which you incurred in earning your income. So, if you have incurred a work-related expense, and you have the paperwork to prove it, don’t hesitate to claim it.
As a rough guide you might be able to claim the following below.
- Working from home expenses. If you’ve been working from home due to COVID-19, you should claim the work-related costs of your home running costs, like gas, electricity, mobile phone, internet and so on. There are now three methods for claiming; your tax accountant will be able to help you find the best one
- Clothing and uniforms. You can claim the cost of buying and cleaning occupation-specific clothing such as work uniforms.
- COVID-19 protective equipment, including hand sanitiser, antibacterial soap and face masks
- Have you thought about claiming your hand bag? If you use it for work-related purposes (such as carrying documents and files), you can score a tax deduction for the work-related proportion of the cost.
- But don’t embellish deductions….
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 for instance.
Self-lodgers using the ATO’s myTax program are monitored as they prepare their return by the ATO’s computer systems to ensure they’re not over-claiming.
The ATO’s computer systems compare your claims to those of others like you and if your claim rings alarm bells, myTax will give you a stern warning inviting you to rethink that deduction. Ignore that message, and you could be headed for an audit!
If your deduction claims are found to be incorrect, you will be required to repay the tax avoided, plus pay interest. If the ATO believes that you have acted carelessly, a penalty between 25% and 95% of the tax avoided may also be charged.
- Get help!
Australians who have done well on the share market, with property or even with Bitcoin during the past year face being audited if they get their returns wrong.
Australians can face a 25% penalty for carelessly miscalculating how much they earned from shares, investment properties, and now cryptocurrency.
Experts are experts for a reason. Due to the ever-changing nature of our world, this year Australians need to visit a tax professional/expert to help them to understand their entitlements, and ensure they are receiving the deductions they are entitled to.