tax-refund

5 tips to maximise your tax refund

The best way to maximise your tax refund this year (and every year for that matter) is to make sure you claim everything that you are entitled to. The greater the tax deductions you claim, the larger your refund is likley to be.

Below are a few helpful hints and tips on how you can go about claiming the deductions that you are entitled to.

1 – Be organised

car-expenses

In general, before you can claim a deduction, you must satisfy three basic principles:

  • You must have spent the money yourself;
  • The expenditure must be related to your income; and
  • You must have a record to prove the expense.

More often than not, the expense is not claimed simply because it has been forgotten. Either the receipt has been thrown out, misplaced or was never received.

There are many ways to keep track of your costs. Here are a few you can implement before completing your 2018 tax return:

    • If you have a lot of cash expenses, you will need to go through all your receipts and keep all the ones that relate to the earning of your income. For example, this could be fuel for your car, materials/tools for work, stationery, books etc. Nowadays, there are many free apps you can use to scan and store them online or on your phone. And even though it is 2018, we find keeping receipts and invoices in folders or boxes still works just as well.
    • If you have a lot of expenses on your bank/credit card, every month, you should go through your statements and highlight all the work-related transactions. Come tax time, you will have a neat and simple record of all your expenses. If your statement does not show the supplier’s name or a description of the purchase, you must write these details in yourself.

2 – Claiming your car travel

Car travel expenses are some of the most incorrectly claimed deductions and, as a result, the ATO will be placing extra attention on taxpayers who claim these expenses in 2018.

A lot of people mistake traveling from home to work as a deductible expense. This is not the case and should not be claimed in your tax return.

However, there are many situations where claiming your car travel is perfectly allowable. These include:

      • Traveling between workplaces/worksites
      • Traveling to client meetings, training sessions, seminars etc
      • Traveling to and from work if you must carry bulky tools/equipment and cannot store them at work
      • Carrying private patient files and other sensitive materials between home and work

If you’re using your car a lot for work, it is best practice to keep track of all your car expenses (fuel, repairs, registration, insurance, tolls, parking etc). Keeping a logbook is also essential to maximising your car claim.

3 – Claiming your home office expenses

In today’s society, many people find themselves working longer hours. This trend often results in working additional hours from home both after hours and on weekends. This is especially true of small business owners who, more often than not, are burdened with record keeping for their business.

Depending on your personal situation, you may able to claim a proportion of costs such as:

  • Rent or mortgage interest
  • Gas and electricity
  • Internet and home phone
  • Home office stationery and furniture

The types of expenses that you can claim, and the amount you can claim are dependent on whether you work solely from home, or whether you only work part time/nights from home. It also depends on the type of work you do and the whether you have a dedicated space at home used solely for work.

4 – Charities and Donations

Another expense that is often forgotten are the donations made during the year.

Donations are given out of kindness and dedication to a cause, and we often don’t think about the tax benefits we can receive for our generosity. Nevertheless, the Australian Government reward your kindness with a tax deduction.

One of the most overlooked deductions within this category are school building fund contributions. If your child is enrolled in a semi private, fully private or catholic school, these contributions could add up to thousands of dollars per year. Keep a record of these payments and the invoices provided to you by the school.

To be able to claim donations to a charity, the payment must satisfy a few conditions. They are:

  1. The donation must be $2 or more;
  2. You must have a valid receipt/invoice;
  3. The charity/organisation must be a Deductible Gift Recipient;
  4. The donations must be monetary or a financial asset (eg you can donate a car and claim a deduction in certain circumstances. But you can’t get a deduction for donated clothes).

5 – Other work-related expenses

Different occupations have different expenses that are able to be claimed. Generally, deductions are occupation specific. For example, a doctor will claim different deductions to an electrician, and a plumber will incur different expenses to a teacher.

There are many small expenses that you incur for work which add up over the course of the year.

Some expenses are more obvious than others such as tools, seminars/training and so on. But some are missed like your mobile phone expenses, stationery, memberships/subscriptions etc.

If you incur an expense related to your work, then more often than not, it will be deductible.

As always, keep track of all these expenses and come tax time we will assist you in maximising your tax deductions.

Find out more

Listed here are a small sample of what you might be able to claim.

For more information on what you are entitled to and to maximise your tax refunds, please speak to us and we can steer you in the right direction.

tax-scams

Tax scams: don’t be a victim

Tax scams are real and taxpayers need to be vigilant about bogus calls, text messages and emails from scammers. Some scammers go to great lengths to deceive taxpayers, including impersonating government representatives on the phone, sending fraudulent emails and even creating fake websites. It’s important to stay informed about what the latest scams look like, and know what questions to ask so you can avoid being scammed.

The ATO warns taxpayers to always watch out for scammers. Each year, the ATO receives a growing number of reports from the public of new phishing scams – it detected over 17,000 scams during the first half of 2017. Not only do scammers try to steal money, they also try to steal identities. The Government has identified several cases of misuse of stolen personal information that have led to fraudulent income tax returns, as well as GST, superannuation and welfare frauds.

Scammers are becoming more sophisticated in their attempts to defraud the public and trick people into handing over money, their tax file numbers and other personal information. A recent stratagem is to telephone people, displaying an official-looking ATO number as a caller ID so the victim feels confident enough to engage with the scammer and will provide personal information – this type of impersonation is known as “spoofing”. Sending emails containing links to bogus websites that mirror the official ATO website is also still a popular scamming method.

The typical story is that a fraudster contacts a taxpayer out of the blue claiming that the taxpayer has overpaid taxes and is entitled to a refund. The fraudster often asks the taxpayer to pay an “administration” or “transfer” fee to obtain the refund. They may also ask for the taxpayer’s personal details, including financial details such as bank account information so that the “refund” can be transferred. If the taxpayer hands over money, chances are that it is never seen again, and no transfer is forthcoming.

Another tactic is when fraudsters phone to demand that people pay allegedly unpaid taxes. The ATO is aware of one such aggressive scam where taxpayers are threatened with arrest if they do not pay a fake “tax debt” over the phone. Scammers may also demand payment in gift cards, such as iTunes or prepaid Visa cards.

“Scams are most prevalent during tax time, but it’s important to remain vigilant for them throughout the year.”

If you receive an email, a text message (SMS) or an unexpected phone call from “the ATO” claiming that you are entitled to a refund, that you owe taxes or that you must confirm, update or disclose confidential details like your tax file number, delete the message (do not click any links or download any attachments) or hang up the phone.

From time to time, the ATO itself will send emails, text messages or official social media updates to advise you of new services. However, the ATO’s messages will never request personal or financial information by SMS or email, and its representatives will never ask you to pay money into a personal bank account.

If you receive a call, an email or an SMS and are concerned about providing personal information, you can call the ATO on 1800 008 540 (8 am to 6 pm, Monday to Friday), forward the suspicious email to ReportEmailFraud@ato.gov.au or check your myGov account for any message from the ATO.

You can also contact our office for more information if you have concerns.

Treat

Will your tax return be a “trick” or “treat”?

What’s happening on 31 October? Hint: it’s not Halloween! To avoid a tax nightmare at the end of the month, get your 2017 paper work to us as soon as possible so that we can file your tax return for you on time.

To help you prepare for your tax return, here are some tips on the types of claims that are now coming under scrutiny by the ATO, and what you need to do to minimise your chance of being audited.

What do we need?

So that we can process your tax return smoothly and quickly, please supply us with the following:

  • Tax File Number (new clients);
  • annual payment summary issued by your employer detailing how much your earned and how much tax you paid in the financial year;
  • ABN (for any freelance or contract work);
  • ABN-related summary of earnings and copies of all invoices;
  • private health insurance annual statement – required to avoid Medicare Levy if earnings are over the threshold;
  • investment property annual statement – outlining rental income earned and expenses to be offset;
  • bank statements – these can be used as records of purchases, against which you may be able to claim deductions;
  • utility bills if you need to claim home office expenses;
  • receipts of work-related expenses;
  • logbook, or diary for work-related expenses (ie, car, travel).

If you’re unsure about what claims are appropriate in your industry, make an appointment with us, or give us a call and we can go through this with you.

“When considering your work-related claims, keep in mind that the ATO is coming down hard on excessive or false claims under their ‘don’t dodge when you lodge’ campaign.”

Taxpayer pitfalls in the Digital Age
The ATO is coming down hard on excessive or false claims under their “don’t dodge when you lodge” campaign.

Aided by sophisticated analytical technology, the ATO can use real-time data to assess and compare claims across occupations and income brackets, which means, as ATO Assistant Commissioner, Kath Anderson states “wrongdoing can’t fly under the radar. If a claim raises a red flag in the system, auditors will investigate further”.

In 2015–2016 the ATO conducted around 450,000 reviews and audits of individual taxpayers, resulting in adjustments of nearly $1 billion in income tax, and prosecuted over 1,300 taxpayers.

So let’s revisit the areas the key things to remember when preparing your tax return.

On the ATO’s radar

Genuine work-related expenses are generally deductible under tax law, but those coming under increased scrutiny this year are expense claims relating to:

  • making claims for home office, mobile phone and computer expenses without any evidence supporting how the claims were apportioned between private expenses and work-related expenses;
  • incorrectly claiming travel between home and work as a work-related expense; and
  • receiving a travel allowance and claiming the full amount without actually having spent that much.

Golden rules of claims

To help you make sure you are claiming to what you are entitled, here are the ATO’s three golden rules:

  1. You have to have spent the money yourself and can’t have been reimbursed by your employer.

  2. The claim must be related directly to earning your income.

  3. You need a record to prove a claim.

Whilst you don’t need to show receipts for a standard claim up to $300, you must be able to show how you estimated the claim for deduction if asked by the ATO.

The ATO will also continue to review excessive claims for work-related expenses, and will contact employers to verify what it considers to be any “unusual” claims.

Here are some tax case studies which provide examples of what cannot be claimed and the penalties for incorrect and false claims.

Some examples

False claims – car, laundry and self-education

A labourer claimed falsely for a number of deductions, including for his car, self-education, clothing and laundry work-related expenses of over $10,000 over two years. He was charged with three counts of recklessly making false or misleading statements and had to pay penalties and fines. He was unable to provide any receipts or records, and when the ATO spoke with his employer they confirmed he was not required to use his own car at work, he did not have any work-related study, and that the employer supplied and paid for his required work-related clothing and his laundry costs.

Repeated failure to lodge

A landscaper neglected to submit tax returns over a 12-year period, despite being given adequate opportunity to comply with lodgement obligations. He had two previous convictions for failing to lodge (income and GST returns) and failing to comply with a court order in relation to the same income tax returns. On those occasions, he was fined $50,000 and $63,600 respectively in March 2015 and October 2015. The landscaper was found guilty and convicted to eight months’ imprisonment. The Magistrate stated that sentencing was the only appropriate option, and commented that the previous fines imposed had not been an adequate deterrent and the community needed to know that there were serious consequences for repeatedly not lodging tax returns. This term of imprisonment was suspended, subject to a 12-month good behaviour bond with an order to lodge the required returns within six months or the landscaper would be sent to jail.

We’re here to help

Avoid any trickery and talk to us if you’re uncertain about any of your potential claims, or which records we need to process your return. We’re here to make sure you get a fair and accurate tax assessment.

Refund

Maximise your refund, don’t miss any deductions

People who lodge their own tax return commonly make two mistakes which will cost them dearly.

The first mistake is claiming personal expenses that are not deductible.

Claiming expenses that are not deductible can be disastrous. Not only do they run the risk of getting audited by the ATO, but if they are audited, they will have to repay the tax refund that was wrongfully received and may also face additional fines and penalties.

The second mistake is not knowing what expenses can be legitimately claimed in their tax return. Not knowing which expenses to deduct will also hurt the hip pocket. The ATO does not automatically include deductions in a tax return, so not knowing what to claim can mean the refund could be lost forever.

Different professions are able to claim different types of expenses. There is no “one size fits all” guide to claiming tax deductions. If you are unsure if your expenses are deductible, its always best to keep your receipts and ask your accountant when completing your tax return.

You can avoid both these mistakes by going to a qualified chartered accountant and registered tax agent. In order to complete your tax return accurately and get the best refund you are entitled to, contact us and we can put you on the right path.