With tax time right around the corner, there are many ways for Australian taxpayers to improve their tax returns… So our team have decided to come together and collate our top 3 tax savvy tips to help you make the most of your 2019 return!
Tax tip #1. Home office expenses
Do you ever take your work home with you? If so, you may be eligible to claim a deduction for the time spent working from home. There are two separate methods to claim these expenses, the fixed rate and actual expenses method.
The fixed rate method allows you to claim running expenses using a set rate per hour, instead of recording all your actual expenses for heating, cooling, lighting, cleaning and decline in value of the furniture. To do so you are not required to keep records of all these expenses separately, however, you are required to keep records of your actual hours spent working from home. The fixed rate has been increased to 52 cents per hour for the 2019 financial year.
Keep in mind, you are generally not entitled to claim running expenses (eg. Heating, cooling, lighting and decline in value of furniture) if you do not have a dedicated work area. In this instance, you are only allowed to claim the additional expenses as a result of working from home, for example, additional ink used for printing or work-related usage of a depreciating laptop.
The second method is claiming a deduction based on actual expenses, for which you are required to have a dedicated home office. Using this method, you are required to keep records of all your running expenses as well as work out the decline in value of depreciating assets. You are also required to either maintain records of the number of hours you work from home or keep records during a four-week period, to determine your normal pattern of working from home and work-related usage. You are then entitled to claim a deduction for the proportion that reflects your work-related use of these expenses.
When claiming either of these methods, other expenses such as phone, internet, stationary and decline in value for equipment will need to be separately claimed, generally by working out the work-related use for these items.
Tax tip # 2: Donations
Another possibility to improve your tax refund is by donating to a charity. If you donate $2 or more to a registered charity, it is generally tax deductible, as long as the organisation is registered as a ‘Deductible Gift Recipient’ with the ATO. You are also required to substantiate the donation, either with a receipt or bank statement. Another thing to note is that if you receive something as a result of your donation, such as a raffle ticket, you cannot claim the donation as a deduction.
So, while donating to a charity is a positive and admirable act in itself, it also has an added benefit of improving your personal tax return – win-win for everyone!
Tax tip # 3: Timing
Be thoughtful of when to purchase a large work-related expense which is tax- deductible. If you are expecting in the next year that you’ll need to purchase a big ticket item, it’s important to be mindful (especially if you’re a sole trader) or when you purchase this as it can have a significant benefit for your next tax return.
For example if you’re running your own newly established business and you expect your sole trader income to increase substantially in the next 12 months over the 2020 financial year, by holding off (if possible) the purchase of your next work-related asset worth up to $30,000 until the 1st of July of this year, using the instant write-off method could help lower your taxable income and may even be the thing you need to keep you from moving up into a higher tax bracket for the 2020 financial year… saving you some big bucks come tax time.
On the other hand if you know you have had a bumper of a year and have earned higher than usual income, it may be the perfect time to put some money back into repairing that rental property or replacing old work-related tools which you may have been holding off for a while now as this will help lower your taxable income for 2019.
For every profession, there may be numerous work-related expenses which are industry specific that are tax deductible. So it’s important to think of all the expenses you’ve incurred (which your employer hasn’t already reimbursed you for) which relates directly to your job because if there’s a nexus it’s most likely a tax-deductible expense that you should be claiming!