How to make the most out of your tax return

  Louis Costello, originally published on Pedestrian TV

It’s officially tax time again, fellow taxpayers, which means we can expect an onslaught of Aussies seething as they watch their mates cop a small fortune while they’re left with pennies.

Regardless, this doesn’t mean that we can’t make the most of our own tax returns and whichever way you slice it, a few extra dollars in your account come refund time is rarely going to be scoffed at. It’s better to take the time to go through your options properly than to rush it. You have until October 31st, after all.

Behold, a few tips that could earn you a nice little bump in your tax return. This article was originally published on Pedestrian TV.

Pedestrian TV logo   Louis Costello, originally published on Pedestrian TV

Keep a record

Alright, rule numero uno: keep track of your spending for the entire financial year (July 1 – June 30th). I know, I know, it’s a bit of a lost cause if you haven’t been holding onto receipts and documents this year because the ’19-’20 financial year is officially complete, but there’s no point looking back, so just keep it in mind from now on.

The thing is, the Australian Taxation Office has a limit on how much you can claim without proper documentation. For instance, you can claim up to 5,000 kilometres worth of petrol (at 72 cents per kilometre) without the receipts or a logbook, but anything over that and you’re going to need to start showing some proof – see other handy tax time tips.

Mr Taxman himself, aka Adrian Raftery, recommends logging every work-related receipt with the ATO’s myDeductions app, which is “an easy way to diligently record your receipts for year-end by simply taking a pic with your mobile device at the time that you incur the expense."

Once you get into the habit of recording all of your expenses, you’ll be able to claim far more back come tax time than you would without the proof.

Know what’s deductible (and what isn’t)

The main reason some Aussies get peanuts compared to others' tax returns is because they’re simply unaware of what expenses they can claim.

The list is pretty damn long – which I recommend you check out through the ATO – but seeing as I’m working from home for the foreseeable future, I found it interesting to learn that I can claim a portion of electricity, internet and phone bills as they’re all involved in my day-to-day work.

The no-no list is just as long as the A-OK list, though, so be wary of what you’re claiming and what you aren’t. For example, you can’t claim coffee and milk as part of your work-from-home tax-deductible expenses, which is a bummer for those who believe coffee is a downright necessity.

Here are some golden rules given by the ATO when figuring out if something can be deductible:

  • You must have spent the money yourself and weren’t reimbursed
  • It must be directly related to earning your income
  • You must have a record to prove it (usually a receipt).

Be careful when timing your tax-deductible purchases

As Mr Raftery explains, “It’s pointless buying a tax-deductible asset that cost more than $300 at the end of the financial year. This is because depreciation of these assets is pro-rated for the number of days that you own them during the financial year – for example, a $1,000 outlay on 29 June produces a measly $1 deduction at tax time,” he continues.

“If you are going to get that new computer or car used for work purposes, it’s better buying in July as depreciation have much more impact when spread over a whole year rather than just a few days."

Makes sense? Makes sense.

Decide whether an accountant is for you

There are a lot of questions around the need for an accountant to do your tax return. Simply put, an accountant can be of great use if you have various assets or incomes, or if you just want to get as much out of your tax return as possible. It’s important to suss out a good one though, as you’ll be dropping a bit of cash on them so you’d hope that investing in an accountant would result in a significantly higher tax return than if you didn’t. In saying that, the cost of a tax agent can also be claimed as a deduction during the next financial year (if you keep the receipt), so it might be worth giving it a go.

Be wary of accountants who are willing to claim expenses that you don’t believe are legitimate. At the end of the day, the onus falls on you, so if your accountant has been naughty, they can claim it was at the direction of their client. Very sneaky indeed.

Make a plan for your refund

Alright, so you scored bigger than usual, now you have a few options: blow it on something you’ve always wanted, pay off some debt, or pop it in a savings account as a little nest egg.

The mid-to-late-20-something in me is telling you to open a separate savings account, create a goal and make sure you’re working towards your future.

The decision is ultimately up to you.

Keep reading

Check out the other articles that are part of this content partnership below, or see our range of other handy guides.

Get some handy tips to manage the subscriptions linked to your account.

Find out which of your bills you might be able to negotiate, and how to do it successfully.

Learn how to save, no matter how your account’s looking.

Find out how to manage your money the moment it hits your account.

Learn how to pick up habits that can help you save more.

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