Time flies by when you’re having fun, but the end of financial year is once again upon us and you might be wondering what you can do to make the most out of your hard-earned money this year. Our very own Marissa Schulze and RittWatchman & Associates Chartered Accountant’s Director, Amanda Watchman, are back with the greatest tax tips for employees, so you can get ready for this end of the financial year and start the next one in the best shape!
What is the ATO looking for this year?
The ATO has made its announcements and these are the four main areas they will be focusing on this EOFY:
- Work related deductions
- Capital gains and cryptocurrencies
- Rental properties
As an employee, work-related deductions will be your main ally when it comes to maximizing your returns. Considering that you might have kicked off the year working from home, and might even have stayed permanently in your home office, what can you claim?
What can you classify as work-related deductions?
Work-related deductions are any deductions relating to your employment. They could be anything including your car expenses, traveling, uniforms, working from home deductions and the list goes on!
This year, the working from home deduction allows you to claim up to 80 cents for every $1 for full-time work (so 38 hours). As part of these deductions, you might want to claim costs such as your mobile phone and even some living expenses. The outcome? Some really great tax returns!
How can employees claim deductions?
It all sounds great right! So how do you claim it?
Well… say you’re wanting to claim deductions on your car. To do so, you’ll need a letter from your employer specifically stating your need to use your car for work-related purposes, as well as a clear outline of what would be considered a work-related purpose.
To assess exactly how much you will be able to claim, we recommend:
- Using a log book to keep track of your kilometers over a 3-month period, or
- Using the ATO’s free app (if you are more of a ‘track it on an app’ kind of person!)
If you are the latter, speak to your accountant about potentially tracking your other deductions digitally throughout the year, to facilitate sharing these with them and the ATO once the end of the next financial year comes up again!
This year is an exciting opportunity to really step up your game and get the most for your money. So make sure you let your accountant know that you’ll be claiming a few extras to maximize your returns.
Our best tip? Don’t get caught in the easy trap of telling your accountant to claim “the same as last year”.
Claiming tax on other purchases as an employee
The world of possibilities that come with potential working-from-home claims might have you wondering what you have bought in the last year and if any of it would be claimable.
Before you claim the shirt you wore that one time, it is important that you make sure there is a significant link between the item and your job.
When it comes to purchases you can include in this year’s tax return, keep in mind that the link between the item and your job must be evident. So you absolutely can claim your shirt, as long as it has a logo or strong evidence supporting its connection to work for it to be fit to claim.
Tax deduction opportunities you need to know about
The count down to the end of financial year has well and truly begun! So it is time for you to have a look at your current financial situation and see if there are any work-related deductions you can incur in, just before June 30th.
One of those great deductions we suggest is superannuation. This year, you’ll be able to claim up to $1000 with your employer as a deduction against your tax return.
If you have any spare cash just hanging around, see if you can claim that deduction! It will definitely be worth it in the short and the long term.
Let’s talk about Data Matching…
You might be wondering by now, how does the ATO actually know if I am claiming the right things? This is actually a great question… and we have the answer!
When your employer pays you, that payroll information goes to the ATO. This data then gets collected and reviewed, and when you lodge your tax return, the ATO will check if the information you have provided actually matches their records.
Another great example of data matching is private hospital cover. When looking at your claims, they look at your data and match the amount being claimed.
This might initially sound a bit scary, but If you get it wrong you don’t necessarily need to be too concerned. Although penalties exist for serious infringements, if you just make a mistake and own up to it then you’re in the clear. Penalties can occasionally be forgone, or you can get a heavily reduced penalty instead.
Preparing for the next financial year!
The best way to ensure you end the year in the best financial shape is to start it well prepared. Why stop at your deductions for this year only? Now is the best time to start getting ready for next year, to get the best outcomes on your deductions during the next.
One of the ways you could make a big difference is through salary sacrifice. We recommend starting it out on July 1st, so you can claim an entire year of reduced income!
Most employers will let you salary sacrifice Superannuation and the expenses of your cars. But if you do salary sacrifice for a vehicle lease, then you won’t be able to claim any other expenses associated with your car. This can still make financial sense, as you will get the benefits of reduced tax. Your accountant can provide the best advice for your specific circumstances.
Using these tax tips for employees will help you get the best deductions you can and get a bit closer to achieving your saving goals!
If you want some help with your tax return you can access our checklist here, or reach out to our wonderful team of mortgage brokers to support you on your journey!