Tax time is on the way, folks. That means it’s about that point in the year where many of us start frantically pulling together odd receipts, attempting to work out how much we can claim and where.
This year will likely look a little different for many people, too as after over 12 months of working from home (at least partly) your tax deductions are bound to a little out of the ordinary.
I chatted with Ray Jaramis, Head of Financial Wellness at Employment Hero to get a little more insight into what we may be overlooking come tax time.
If you need a refresher…
When it comes to standard guidelines regarding tax returns, Jaramis pointed to a few old favourites we should be paying attention to.
The three key rules he shared were “What you get to claim back at tax time is driven by what you do for work,” “different accountants often specialise in particular industries” and for “claims on items above $300, you’ll need to have written evidence”.
So, when compiling your data for your return, be sure to keep in mind that your claims need to be relevant to your industry; make a point of working with an accountant that is familiar with your particular needs, and hold onto your receipts for big purchases (you need that proof for five years).
There’s a temporary shortcut method for those who work from home
Living in this brave new world means our approach to work has changed, and the claims you can make off the back of that are also evolving.
Jaramis shared that “Items such as phone and internet expenses, electricity, and even the drop in value of your furniture (due to using it for work) are now potential deductions come 30 June”.
If you’re unsure, it’s always a good idea to ask your accountant’s advice. But if it’s all a bit too time-consuming, the ATO has introduced a temporary shortcut method for claims.
“To help simplify matters the ATO has created three key approaches to claiming your WFH expenses depending on your circumstance; Shortcut, Fixed and Actual,” Jaramis explained.
“Using the shortcut method, you can claim 80 cents per hour for each hour you work from home – you are entitled to this if you’re working from home to fulfil your employment duties and have incurred additional running expenses as a result.
“The fixed rate method allows you to claim a deduction of 52 cents for each hour you work from home for additional running expenses incurred. Or, with the actual cost method, you can claim a deduction for additional running expenses by working out your deduction from actual costs incurred as a result of working from home.”
Again, if you’re confused, reach out to your accountant – they’ll be able to point you in the right direction.
Don’t forget to ask questions
You want to be sure you’re getting the most out of tax time every year, so if you’re not sure about whether or not a claim is relevant for you, keep a record of it and ask.
Jaramis said that “At the end of the year, I walk through each expense with my accountant to learn whether I can claim a deduction. I’m often surprised by where I am able to claim, so it’s always worth asking the question before making a judgement call”.
Depreciation is one area Jaramis stressed as being particularly important to ask about.
“For anyone who owns an investment property, you absolutely should consider getting a depreciation schedule,” he said.
In essence, this is a schedule that will keep track of the depreciation in value on the “fixtures and fittings” in your property each year.
“I have literally seen this create thousands of dollars in deductions back for my clients in the past,” he said.
Just remember that personal expenses (tea, coffee, toilet paper), child education and occupancy expenses (generally) aren’t going to fly. The ATO has also highlighted that it’s worth remembering large expenses can’t be claimed in one go. These must be spread out over a number of years.
Follow all of these guidelines on deductions and you should have a smooth tax time in 2021. If you want more details, you can read on via the ATO website here.