Let me begin by saying I think taxes are great.
Taxes are your ticket to a well-functioning democracy. They pay for some pretty great stuff, such as schools, hospitals, trains and help for those less fortunate (along with some less great stuff, such as expensive submarines and commuter carparks, but still).
However, with the cost of living on the rise, it is more important than ever to make sure you’re not paying more tax than you need to.
So, here are my nine top strategies to boost your tax return this year. But hurry, you will need to act fast on some of them…
1. Buy a handbag
Okay, so spending money is not actually saving money. I get that. However, if you genuinely need a new bag and plan to buy one in the coming months, this is a strategy to consider.
Many people don’t know that you can legitimately claim as a tax deduction on the cost of a bag used to transport work materials to and from your job. This can include a briefcase, satchel, backpack, handbag or any bag of sufficient size to fit your work equipment, be it files or a laptop.
“You can’t go claiming your mini Chanel purse,” warns Helen Francis, principal at TY Francis Accounting & Advisory.
If the bag costs less than $300, you can claim the full amount as a tax deduction in the year you buy it. If it costs more than that, you must depreciate the cost and claim it over multiple years.
The three golden rules of tax deductions apply: you must keep a receipt, you must have incurred the cost yourself (ie not been reimbursed by your employer) and the purchase must be directly related to producing income.
2. Prepare your car mileage
It’s a common tax myth that everyone can get away with claiming 5000km a year in work-related car travel expenses and escape the taxman’s scrutiny.
Not so, says Francis: “The 5000km set rate is definitely less scrutinised, but I wouldn’t say it’s an infallible way to claim car expenses – I’ve had a number of clients audited on this point.”
Still, you are legitimately entitled to make a claim for car travel related to your work (excluding, in most cases, trips from home to work). This can include travel from your office to an off-site client meeting, for example. Or direct travel between two jobs that you hold. Or travel to a work-related conference.
You can use the logbook method or the cents per kilometre method, which requires you to be able to substantiate your kilometres claimed. So, a bit of time with your work calendar to figure out eligible trips can pay dividends at tax time.
Remember, you can also claim costs incurred on any overnight travel you are required to do for work, including meals, accommodation, fares and incidental expenses. Keep receipts!
3. Check your occupation-specific tax guide
The Australian Taxation Office has prepared 40 separate guides for different occupations detailing potential deductions, including for office workers, firefighters and public servants.
Did you know that sex workers, for example, can claim the cost of lingerie used in producing income? Google “ATO and Occupation and industry specific guide” or click here to find out any niche claims you may be eligible to make.
4. Consider work-from-home claim method
During the pandemic, the Tax Office introduced a simplified working-from-home (WFH) claim method, equal to 80¢ per hour worked from home.
However, accountants have warned many people are still better off claiming under the old 52¢ per hour method, or the somewhat more laborious “actual costs” method.
“The simplified WFH 80¢ rule is cheeky,” explains Francis. “It only really works out best if the taxpayer has a really, really cheap mobile and internet cost at home, and they haven’t incurred any home office furniture or computer expenses (maybe work paid for it).”
“But in most cases I’ve seen – and I’ve lodged 4000-plus returns during the COVID period – reverting to the old 52¢ per hour WFH method for electricity and decline in value of furniture works out better, with a percentage claim on top for internet, phone and computer consumables.”
If in doubt, check with your accountant.
5. Pre-pay investment property expenses
If you have an investment property, you can maximise this year’s tax bill by paying in advance for expenses such as strata fees, insurance or necessary repairs on your property, or properties. This reduces the amount you can claim next financial year, but tax savings are always best served up front, if you have the cash to deploy today.
6. Consider self-education expenses
Workers are entitled to claim the cost of self-education to increase their skills, or boost their income earning capacity in their current job. These might include purchases of books, magazines, journals and newspapers relevant to their work.
Investors can also claim the cost of materials relevant to building and managing their share portfolio. Self-education expenses can also include attending seminars or conferences relevant to your field.
7. Remember union fees
The cost of union fees and memberships to relevant professional associations are tax deductible. Keep receipts and consider prepaying where possible.
8. Make a contribution to super
If you are a mid-to-high-income earner and are still under the $27,500 annual cap for making concessional contributions to your superannuation, you can consider making a one-off end-of-financial year (EOFY) transfer into your super from your post-tax savings.
Remember, the cap includes both your employer contributions and any voluntary contributions you have made throughout the year.
Instead of having to pay tax on this money at your marginal tax rate, you’ll only have to pay tax of 15¢ for each dollar that goes into super, leading to a potentially large tax refund.
If you do this and wish to claim it as a tax deduction, make sure the money is received by your fund this financial year, and also fill out a “notification of intent to claim” form and have it acknowledged by your fund before you lodge your tax return.
9. Consider a charity donation
Donations to charities registered as “deductible gift recipients” are 100 per cent tax-deductible. You can check the tax status of a charity at abr.business.gov.au/Tools/DgrListing.
Happy EOFY everyone!
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Jessica Irvine is author of the best-selling new book Money with Jess: Your Ultimate Guide to Household Budgeting. You can follow more of Jess’ money adventures on Instagram @moneywithjess and sign up to receive her weekly email newsletter.