As July 1 looms closer, it's time to start thinking about lodging those tax returns, as dull as they can be.
H&R Block lodge around 750,000 tax returns every year and it turns out many of us are still making errors that can cost us. We had a chat to H&R Block 's Director of Tax Communications, Mark Chapman, to get to the bottom of where we're going wrong. And apparently, there are six big misconceptions that many Aussies believe.
These days, the ATO receives much of your income information electronically from third parties rather than from you yourself.
"This includes most institutions that pay interest and dividends, foreign income from overseas tax offices, salary information from employers and pension payments," Mark says.
It's this information that's used, therefore, to match what is declared in your tax return.
"If the income declared is not the same as the income matched, the ATO will query the difference," Mark explains. "The items of income which are most commonly missed are capital gains (from the sale of shares or property, for instance), bank interest (many people simply don't realise it's taxable) and income from overseas, all of which is taxable in Australia if you are resident here for tax purposes."
Do you work in finance but want to claim your film studies degree? Well, unfortunately you can't.
"You need to be sure that any courses you undertook have the necessary connection to the income you are currently earning from your job, otherwise the deduction is not allowable," Mark says.
"Many people try to claim for study which relates to an entirely different line of work (for instance, if they are looking at a career change) or that is too general in nature to be closely linked to your current work."
It may not be allowed, but many people try to claim a percentage of rent or the interest on a mortgage if they are working from home to do work after hours.
Mark says, "You are only entitled to claim a percentage of the actual costs incurred i.e., electricity and heating costs, depreciation of office furniture and equipment and a percentage of telephone and internet use based on a diary kept for a four week period."
There are a lot of blurred lines when it comes to business versus personal use, so unless you have plenty of documentation to support your claim, forget it.
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First up, if your employer pays for your car you aren't entitled to claim any expenses in your tax return. If you own your car, however, you need to have specific records to substantiate any claims.
Keep a log book plus receipts and invoices and an actual record of the kilometres travelled if you're claiming the cents per kilometre method.
Mark says, "If you get to the end of the year and you haven't kept a log book, it's too late!"
"Also note that the kilometres method can only be used to claim up to 5,000 business km's per vehicle."
Whether it's your phone or a laptop, many of us have items that we use both for work and in our day-to-day lives.
But if you want to claim that part of the expense that directly relates to your job, you need to back it up with evidence.
"You will need to keep a log to determine the business percentage to support your claim," adds Mark.
According to Mark, there is one golden rule when tax time comes around.
"If you spend something as part of your income earning activity (whether that relates to your job, your business or a rental property), you can usually claim a tax deduction provided you weren't reimbursed (by your employer for instance) and provided that you can prove that you spent the money (so you need invoices, receipts, etc)."
If you're working in a mainstream job, think outside the box when it comes to those claims.
"For instance, if you work from home in the evenings or at weekends, think about claiming work-related home expenses," Mark explains.
"If you use your personal mobile for work related calls, texts or emails, think about claiming part of the cost. And don't forget that costs such as income protection insurance are claimable."
This year things are a little bit different as the government's Low and Middle Income Tax Offset kicks in this year.
"This can give you up to $1,080 tax back straight from the government, but you must lodge your tax return in order to claim it."
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Australian Women's WeeklyToday 10:08am