Max your tax return
According to our expert, there are five easy steps to ensure that you supersize your refund this tax time.
There’s a lot to love about tax time. Around seven out of 10 Australians receive a refund each year – that’s about 10 million people pocketing valuable extra cash. But you don’t have to settle for the minimum refund. With the end of the financial year fast approaching, there’s still time to clock up additional tax deductions – and you don’t always need to spend more to get more back.
Here are five steps to take before 30 June to ensure a generous refund …
1 Get a handbag ( yes, really!)
Life is short. Buy the handbag! You may even be able to claim the cost of it on your tax. Okay, there’s more to it than that – the cute little clutch you picked up recently is not going to pass muster with the tax office. But a bag you use to carry work papers, your laptop or tablet can be tax deductible. Remember to hang onto the receipt as proof of purchase at tax time.
2 Upskill
Investing in your professional skills is a great way to boost your income-earning ability, and the cost could be tax deductible. Complete a course related to your field of work – as long as you, and not your employer, pay for it, the cost is normally deductible. Get involved and join a professional body relating to your industry; you should be able to claim the subscription on tax. The cost of books, journals and magazines relating to your line of work can also be deductible.
3 Invest
How good is this? Research from Investment Trends shows the number of active online investors in Australia reached a record high of 1.25 million by the end of 2020, with an extra 435,000 Aussies trading for the very first time during lockdowns.
If that sounds like you, you’ll need to record any dividends from shares or distributions from exchange traded funds (ETFs) in your tax return. It’s easy. The company share registry or fund manager will supply all the information you need.
If you sold investments during the year, any gains or losses on sale need to be recorded in your tax return. But there’s a good reason to hang onto your investment for the long term. You can claim a 50 per cent discount on capital gains tax if you owned the investment for over 12 months. Remember, too, that as an investor you may be able to claim at least part of the cost of any investment magazines, plus internet access and even computer depreciation related to managing your investments.
Our tax laws are complicated, so it’s always worth speaking to a registered tax agent to know exactly what you can claim. Around 70 per cent of Australians use professional help to complete their tax, and guess what? Your tax agent’s fees can be claimed too!
4 Record time working from home
If you’re among the millions of people who’ve been at home during COVID, don’t forget to claim the new 80 cents per hour work-from-home deduction. First introduced last financial year, this tax break has been extended for another 12 months by the Tax Office.
It’s super easy. Just keep a record of the hours you’ve worked from home by using a diary, time sheets or a spreadsheet. Add up the hours, then multiply the total for the financial year by $0.80. As a guide, if you worked eight hours from home each week over a 40-week period, that adds up to 320 hours. Multiply this by $0.80, and there’s an extra $256 to claim on tax.
One note: The 80 cents per hour method is easy but it covers all the costs of working from home, meaning you can’t claim any extras. If you’ve been making a lot of phone calls or running up big internet bills while working from home, there is an alternative. You can claim 52 cents for each hour worked from home, which covers depreciation of home office furniture, and electricity/gas for heating, cooling and lighting. Then, you make a separate claim for workrelated use of your phone or internet expenses, as well as stationery and depreciation of computers etc.
This second method does involve more effort. You’ll need to keep invoices proving how much you’ve spent, plus a four-week diary recording the workrelated portion of the additional costs you’re claiming – but it can be worth the effort. And if you’re an employee, claiming the cost of working from home shouldn’t impact your house’s exemption from capital gains tax.
5 Add to your super
This is important. Women retire with close to half the super of men. But there is a way to close the gap – and land a supersized tax refund in the process. While you can’t claim a deduction for super contributions made by your boss, you may be able to claim a tax break when you add to super from your own pocket.
Tax-deductible contributions are limited to $25,000 annually. This total includes your employer’s contributions. If you’re on a salary of $50,000, for instance, your employer should have paid $4750 into your fund this financial year. That means you could potentially add an extra $20,250 to your super and claim the top-up on tax.
Okay, not all of us have $20,000 lying around. But any extra you add to your super means more money in retirement with potential tax savings today. Think of it this way: If you’re aged 50, adding an extra $3000 to your super each year could boost your nest egg by $53,000 when you retire at 67. If you’re a middle income earner with annual income from $37,000 to $90,000, that same $3000 could see you pocket an extra $1005 in your tax refund each year. Win-win!
You’ll need to let your super fund know you plan to claim a tax break for extra contributions before lodging your tax return. It’s as easy as filling out a form on the fund’s website.