It's coming up to tax time and while many of us might shudder and put it off, we should relish the thought of a legitimate tax refund.
Unfortunately, many people only think of tax when it is time to lodge their return.
In fact, I recently heard that there is more than $1 billion of legitimate deductions that are not claimed either through ignorance or poor documentation.
This is low hanging fruit which should be claimed.
Why then is it missed?
We should be constantly reviewing business and work-related expenses as well as saving receipts at the time of purchase, not trying to remember what we’ve spent at year’s end.
On the other hand, the ATO estimates that there are more than $8 billion of unsupported or incorrect claims so it’s vital that you are accurate with all of your claims.
Tax can be complicated, but your accountant should advise you on what is deductible and what is not.
It’s important to understand that tax planning helps with both this year’s tax as well as setting you up for next year.
As much as possible you should have a dedicated credit card to pay for all allowable expenditure as these statements are normally accepted by the ATO to substantiate claims.
Even the cost of the card would be deductible under these circumstances.
So, what are some of the day to day expenses that are claimable that many people don’t know about?
- Brief cases and hand bags. Yes, handbags, used to carry work-related material and laptops and tablets can be claimed either in total or over several years.
- While many of us claim mobile phone and internet expenses based on work-related usage, just as many people forget about the various apps purchased to help in their work or time management such as calendars and diary apps.
- When working outdoors, the cost of sunglasses and sunscreens with sun protection (including moisturisers, etc.) is deductible as is clothing used in specific professions or to protect you from illness or injury such as support stockings and safety or non-slip footwear.
- Bank fees can be deductible if the account is used for business, including the receipt of your wages.
- If you are required to work from home, then costs of consumables such as electricity, etc. is deductible on a proportional basis. For people who work from home, the proportional costs of rent can be deductible for a dedicated office in what is a larger property than you would have normally rented. Caution, though, if claiming home expenses on your principal place of residence as this would decrease the tax-free component on a sale and could trigger proportional land tax.
- You can claim the costs of stationary that is used to improve your work efficiency.
- Laptops and tablets used in work-related activities which, depending on costs, may be deductible in the year of purchase.
- Subscriptions for work-related magazines, associations and professional bodies.
- Educational expenses for programs that enhance, and support income currently earned – as opposed to new education to move you into a new field of endeavour. Costs of professional development courses, seminars and conventions to maintain your professional qualifications are also deductible. If travel is required, then these costs are also deductible. Remember to only claim travel when the primary reason is for business and if some additional time is spent at a location then apportion the travel and accommodation to pick up the private usage.
- Medical expenses. You can claim 20% of net medical expenses over $2,333 if your adjusted taxable annual income is $180,000 or less (additional income based on number of dependent children). Lower benefits are available for higher income earners.
- Motor vehicle costs associated with the carrying of heavy or dangerous goods needed in your employment.
- Car expenses. Many people forget to claim vehicle expenses when they receive a mileage allowance so either keep a log book or use the mileage method to determine work-related car use.
Claiming unsupported or fictitious expenses should never be made but if you keep records and know your allowable deductions then the legitimate claims can be rewarding.
The ATO understands the variety of work-related expenses for various jobs and professions and can easily see outliers so, again, only claim legitimate and properly documented expenses.
By doing so, you will soon be one of those people who celebrate tax time rather than commiserate it.
This article is general information only and is intended as educational material. Metropole Wealth Advisory nor its associated or related entitles, directors, officers or employees intend this material to be advice either actual or implied. You should not act on any of the above without first seeking specific advice taking into account your circumstances and objectives