Although there are often many other things you would prefer to be doing than maximising your tax return, your time can literally be money if it’s invested in understanding the extents to which you can claim as an individual or a business. To make it a little easier, we’ve put together three quick tips to maximise your tax return in the lead up to June 30.
1. Take advantage of all deductible items
If you’ve made purchases that are directly related to you earning income, and you have the records to prove it (receipts etc.), you may be able to claim some common work-related expenses in these categories outline on ASIC’s Money Smart:
- Vehicle and travel expenses – This does not normally include the cost of travel between work and home but if you use your car for work or work in different locations then you may be able to claim a deduction.
- Clothing, laundry and dry-cleaning expenses – To legitimately claim the cost of a uniform, it needs be unique and distinctive, for example it contains your employer’s logo, or is specific to your occupation, like chef’s pants or coloured safety vests.
- Gifts and donations – to organisations that are endorsed by the ATO as deductible gift recipients.
- Home office expenses – Costs could include your computer, phone or other electronic device and running costs such as an internet service. You can only claim the proportion of expenses that relate to work, not private use.
- Interest, dividend and other investment income deductions – Examples include interest, account fees, investing magazines and subscriptions, internet access, depreciation on your computer.
- Self-education expenses – Providing the study relates to your current job, you can claim expenses like course fees, student union fees, textbooks, stationery, internet, home office expenses, professional journals and some travel.
- Tools, equipment and other equipment – If you buy tools or equipment to help earn your income, you can claim a deduction for some or all of the cost. Examples include protective gear, including sunscreen, sunglasses and hats if you work outside, office equipment, safety equipment and technical instruments.
- Other deductions – other items you can claim include union fees, the cost of managing tax affairs (i.e. your tax agent bill), income protection insurance (not if it’sthrough super), overtime meals, personal super contributions and other expenses incurred in the course of earning an income.
Businesses may claim some of the above deductions, as well as:
- Business travel expenses – including overnight business travel expenses and air, train, bus and taxi fares.
- Motor vehicle expenses – the amount you can claim will vary as to your business structure, the type of vehicle it is and how it is used.
- Salary, wages and super – deductions are calculated based on the type of business you operate
- Repairs, maintenance and replacement expenses – these may include painting, conditioning gutters, maintaining plumbing, repairing electrical appliances, mending leaks, replacing broken parts of fences or broken glass in windows and repairing machinery.
- General business expenses – these are many and varied and could include; advertising and sponsorship costs, bad debts, bank fees and charges, costs of running a commercial website, legal expenses, insurance premiums and public relations costs.
- Cost of employing people – including fringe benefits and travel expenses for relocating employees.
- Your premises expenses – deductions for electricity and phone expenses, rates, land tax and water expenses on business premises and renting or leasing a business premise.
- Tax-related expenses – you can claim registered tax agent and accountant fees, as well as tax-related expenses like having a bookkeeper prepare your business records or obtaining tax advice about your business.
- Claiming capital expenses – i.e. the cost of an asset that is over $20k or an an expense associated with establishing, replacing, enlarging or improving the structure of your business, e.g. building a new website or major repairs like replacing ceilings.
Keep in mind, both as an individual or a business owner, that you must have sufficient records to back up any of your claims. You can find detailed information about what you can claim on the ATO website.
2. Prepay your expenses for the following year
You can prepay work-related expenses such as subscriptions, membership fees and income protection insurance for the following 12 months and claim it in this year’s return. If you own an investment property, you can also prepay expenses on the property such as maintenance, strata fees and council rates.
Businesses can prepay up to 12 months of expenses for the following financial year such as; insurances, interest payments on loans, lease payments, rent payments, subscriptions, phone and internet, business travel expenses, training events and conferences and business asset repairs.
3. Upgrade your work equipment
You are able to claim purchases you have made for income-producing purposes instantly if it costs less than $300. If the item costs more than this, it can be depreciated over it’s working life on a pro-rata basis. Deductions could include hard drives, routers and a work bag.
Businesses, in whatever size or stage, are able to take advantage of the Instant Asset Write-Off Scheme. As a result, any business-related equipment under $20,000 are able to be instantly tax deductible rather than having to claim continual depreciation. You can take advantage of equipment and vehicle finance to purchase before EOFY. Not only can you instantly deduct the equipment (under $20k) or claim depreciation (over $20k), you can also claim the interest payments and insurances on the equipment for the life of the loan.
It’s easy to fall into the same routine tax claim each year. However, by investing some time into understanding what you can claim or prepay on a year-to-year basis, you have the potential to make tax-time not only more interesting, but more fruitful.
The information in this article is of a generalised nature, it is important that you obtain individual financial and tax advice for your own small business.