How to save money on your tax return
A new financial year has dawned, so now is the time to get out your calculator and begin putting your taxes in order. Even if you’ve done a tax return countless times before, you might be surprised at some of the things you may have missed.
To begin with, did you know that you can claim items such as the cost of hiring an accountant and even the travel expenses associated with seeing them? Were you aware that you can also claim income protection insurance and donations?
These are just some of the common items that people either forget to claim, or are completely oblivious that they can claim them at all. So we thought that we’d put together a guide to doing your tax return that will help you save as much money as possible.
What can you claim for work?
When it comes to your place of employment, a tax return can vary greatly depending on the industry that you work in. The ATO has written up a helpful guide that can help you determine the most relevant claims for your given industry, but they will not be identical to others in the same field, even if you work right next to one another.
According to Karen Foat, the assistant commissioner at the ATO, there are “three golden rules” you can follow that will ensure you have the most success in getting back tax on work items you can claim for.
The three golden rules are:
- You need proof of purchase
- The item needs to be directly related to your work
- You paid for the item out of your own pocket and can’t have been reimbursed
Do you work from home?
It’s become a lot more common for people to work from home in recent times, so it can be helpful to know how your tax return might differ as a result.
For instance, a lot of people know that you’re able to receive money back for a percentage of the expenses associated with your utility bills and office furniture depreciation, but just how much can often be a nightmare to figure out.
An easy way to determine this is simply to claim 52 cents per hour that you have worked from home, which should quite accurately cover what you’re eligible to get back on your return. The best way of keeping track of this would be to record your hours worked each week and then tally up the sum over the course of that previous financial year.
Other items you may not be aware you can claim are those relating to self-education or time spent researching information relevant to your work. The main expenses that you can claim when it comes to independent education is:
- Anything that develops or maintains work skills
- Anything you’re studying related to your work
- Anything that increases your payments from a current employer
Such expenses might include items like textbooks, stationary and office supplies, including course fees, student union fees, work seminars and conferences. It’s also important to keep in mind that you can claim a certain amount on travel expenses associated with commuting to and from study locations.
What can you claim for work travel costs?
When it comes to traveling to work and back, it should be noted that the costs involved are not tax deductible. However, if you are required to commute to additional locations specifically for work, such as meeting a client at their place of work, this is tax deductible - including any parking costs.
This also goes for longer travel times such as overnight work trips and the associated costs of food and drinks, etc. The best ways of lodging these expenses is either by recording all individual costs per item for a given trip, or by summing up a rate of 68 cents-per-kilometre you’ve driven. Just ensure that you keep adequate evidence of the number of kilometres traveled, and any receipts for food or fuel.
Should you go it alone or hire an accountant?
At the end of the day, that really is up to you. It will likely depend on your confidence in knowing what you can and can’t claim during tax time, and whether or not you’re willing to go to the effort of doing the work yourself.
Since the cost of seeing an accountant in itself is tax deductible, it’s likely that you’ll benefit from the expert advice and a keen eye, but if you’re certain of what items that you are and are not eligible to see a return on then it might not be worth the time.
Rural tax deductions
If you’re living in a remote area, keep in mind that you are able to claim the zone tax offset. This is an allowance for those living in isolated areas due to the financial hardship associated with an increased cost of living, remoteness, and often difficult environmental circumstances.
If you were unaware of this concession but think you might be eligible, all you really need to do is check the areas that are currently covered by the zone offset and see if you fall into them.
What’s the best way to keep track of your expenses?
There’s no hard and fast rule to this but when it comes to keeping proof of purchase, hanging onto a million receipts over the course of a year might be a little outdated and probably more stressful than the alternative.
Also, it’s important to remember that according to the ATO, credit card statements will not be adequate forms of evidence to help support any claims made, highlighting the usefulness of keeping track of your receipts.
For more than just your own peace of mind, scanning copies of your receipts and keeping them in separate folders either on your hard drive or better yet, saving them to Google Drive, is likely one of the best ways for you to maintain order and make your life a whole lot easier during tax time. Just remember to back up your computer if you’re not keeping your copies online.
This is something you could set some time aside to do each week or at the end of each month so that you don’t get overwhelmed with excess bits of paperwork that would otherwise take you hours to go through.
This is by no means an exhaustive list, but we wanted to highlight some of the key factors that people have either forgotten or were completely unaware of in the first place. Tax time can be a point of stress for many, but hopefully these tips have given you some peace of mind and will help you get the most out of your tax return that you possible can.