Eight simple tips for boosting your tax refund this year
1. The three rules of tax deductions
We claim around $22 billion each year for work-related expenses. It's a big number and the ATO will be focusing on exactly what claims are being made. There are three golden rules when it comes to claiming work deductions. Stick to them and you should be safe.
First, you must have spent the money yourself and weren't reimbursed - so you can't claim that taxi fare the boss paid you back for.
Two, it must be directly related to earning your income - so unless you are an outdoor worker and you wear your new sunglasses on the job, you won't be able to claim them.
Finally, keep your receipts - you need a record to prove it.
2. The mistakes with car expenses
The most common mistakes people make when claiming work-related car expenses is thinking they're automatically entitled to 5000 kilometres as a standard deduction under the cents per kilometre method and claiming for personal travel.
To avoid getting caught out on any free rides it's important to understand the key rules. Generally if you attend work-related meetings away from your normal workplace, or travel directly between two separate places of employment (home doesn't count) you can claim.
The only time you may be able to claim trips to and from home is if you carry bulky tools or equipment to work; for example you're a cleaner and you have an extension ladder or vacuum cleaner, which your employer requires you to use and there is no secure area to store them at work
You can either use a logbook or cents per kilometre method to calculate your claims. You must own the car though to claim. If your car is owned by your employer or part of a salary package, then you're unable to claim anything.
If you're unsure about what expenses you can and can't claim the ATO has a great work-related expense quiz that's worth doing. See how many you get right!
3. $20,000 instant tax write-off extended
There was some good news for small business owners in this year's Federal Budget with the Treasurer announcing yet another 12-month extension of the $20,000 instant asset write-off.
Small businesses are able to claim an immediate tax deduction for all assets acquired for use in the business up to a value of $20,000.
This could include anything from computer equipment or a coffee machine for the office kitchen to solar panels for the office roof or a ute if you're say a tradie.
So while there's no rush to get in now as you have until June 30, 2019 it may be worth talking to your accountant about which financial year would be ideal to purchase an asset and claim your immediate tax deduction.
4. Working from home
If you regularly work from home, you may be able to claim a deduction for some of your expenses. There are two main types of expenses you may be able to claim a portion of:
- "running costs" such as heating, cooling, lighting, and the decline in value of furniture; and
- in very limited circumstances, "occupancy expenses" such as your mortgage interest, insurance, land taxes and rates.
To calculate your claim for running costs, you can use a rate of 45 cents per hour. Alternatively, you can claim the work-related proportion of your actual running costs.
You can only claim occupancy expenses where a space in your home is set aside exclusively as a place of business, for example a doctor or dentist surgery or a hairdresser studio in a home. More details can be found at ato.gov.au.
5. Claiming internet and phone bills
You can claim phone and internet costs if your employer requires you to use these services, but like all work-related expenses, you can only claim the portion of your bill that is actually work related.
If you use your phone occasionally for work and are not claiming a deduction of more than $50 in total, you can claim:
- 25cents for each work call made from your landline.
- 75cents for each work call made from your mobile.
- 10cents for each text messages sent from your mobile.
If you are claiming for phone and internet costs of more than $50, you need to work out what percentage of your usage is for work and apply that rate to your bill to work out your claim. Keep a record of how you have worked out your claim as the ATO may ask for this.
6. Income protection insurance
If you have insurance to protect against the loss of your income don't forget that you can claim the cost of any premiums paid.
You must however include any payment you received under the policy for loss of your income on your tax return.
Life insurance and trauma insurance are some types of policies for which premiums are not deductible.
If you prepay your income protection insurance for next year before June 30, you'll be able to claim your tax deduction in the current financial year. It's worth talking to your tax agent about the benefits of bringing forward any expenses.
7. Two reasons it may pay to take out hospital cover
If you earn more than $90,000 (singles) or $180,000 (families and couples) there's a Medicare Levy Surcharge if you don't have hospital cover (extras-only policies don't count). The surcharge is calculated at the rate of 1% to 1.5% of your income.
This is in addition to the Medicare Levy of 2%. Depending on your income the surcharge could well cover the cost of a policy, so it pays to think about whether this surcharge could be better spent on the insurance. Just make sure you're buying insurance that will cover you for want you want.
If you're over 31 and don't take cover before June 30, then a 2% lifetime loading is payable on your premiums for every year you don't have private health insurance. The loading applies only to hospital cover.
The loading compounds, so if you're 40 and take out cover now for the first time you'll pay a whopping 20% on top of your premiums.
After 10 years of cover the loading is removed.
8. Lodging your tax returns
You have three ways in which you can lodge your tax return. How fast you get a refund depends on which one you choose.
Online through the myTax portal (accessed through myGov) is probably the easiest and quickest way to lodge as most information from your employer, bank and government agencies will be pre-filled by last August. If you've used the ATO's mydeductions app to capture all your expenses you'll also be able to upload your data on this to prefill your tax return. You can expect a refund within two weeks.
If you prefer to go old school, that is lodge a paper return, then you can download or order this form online by visiting ato.gov.au. Most refunds are issued within 50 business days of lodgment.
Finally you can go through a registered tax agent. The cost is claimable.