Tax time. Not the most exciting time for many people but it's something we can't avoid. Having said that, if you know how to do it right, you could be in line for a juicy tax return. Lifehacker Australia spoke with an accountant from H&R Block for some useful tax time tips.
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What you can claim on your tax return is dependent on what industry you're in. While the Australian Tax Office website does provide a lot of written material about what you can and cannot claim deductions on, it can be difficult to navigate through the plethora of information. There are also deductions that can be made that are not immediately apparent.
We recently spokes with Officeworks EOFY Expert and H&R Block director of tax communications Mark Chapman for some valuable advice on filing your tax return. One of the most surprising tips he mentioned is relevant to people who work from home, be it full-time or on the odd occasion:
"There are various deductions people often don't take advantage of. For example, if you work from home, even if it's on weekends, you can claim deductions for things like heating, lighting, depreciation of office furniture, home internet, mobile phone bills and so on. "It doesn't matter if there's no formal agreement with your employer. So long as you can demonstrate that you do work from home, you can claim."
Busting Tax Myths
Back in my early days of employment, I was stressing over doing my tax return when a co-worker wheeled his chair over and told me: "Just claim 30 per cent of everything that is remotely work-related. That's my rule of thumb."
Since then, I've heard people mentioned varying figures as their "rule of thumb" percentage to claim. Chapman provided some clarify around this issue:
"The whole 30 per cent thing is a myth. For anything you claim, you need to be able to justify it and it requires a more scientific method. Ideally, you'll document work-related expenses. For things like phone or internet bills, you would itemise your usage and split them up as private or personal use. This should be done over a four week period."
Most people are probably not this organised but the point is there is no set figure you can go on that applies to everything you want to claim. If you're going to apply for a deduction, just be prepared to show proof to the tax office.
As for work-related equipment, if it's under $300, you can make an immediate deduction, according to Chapman.
Sole Trader Benefits
Small businesses can claim an immediate deduction for each asset that costs less than $20,000. This isn't available to individuals but if you're a sole trader, that's a different story.
"Sole traders can claim that [less than] $20,000 asset deduction," Chapman said.
Bear in mind the deduction doesn't mean you'll get $20,000 back on your tax return but It can reduce the tax payable if you end up owing money to the tax office.
Taxpayer.com.au provides a good example of this:
"For example, say a purchase is made for $10,000 by a sole trader who is on an effective tax rate of 30%. In this case, that person should be able to reduce their tax liability by $3,000 from purchasing the asset. Of course, this assumes that the taxpayer had a tax liability to start off with."
If you really can’t stand the hassle of doing your own taxes, you can always recruit the help of an accountant. I've done my tax return myself and through and accountant and have found that using a good tax agent does make life easier. If you do find an accountant that specialise in doing tax in your field of work, they'll be able to tell you about some of the things you can claim that you may not be aware of.
Besides, you can claim a deduction for expenses you incur when you do your taxes, including lodging a tax return through a registered tax agent, so you won't be left severely out of pocket if you employ the help of a professional.
We'll be bringing out more tax tips before end of financial year so stay tuned!