Whether it's your favourite time of year or the most dreaded period, the end of financial year is almost here and it's time to start preparing those tax returns.
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This year, the Australian Taxation Office (ATO) has changed the rules around claiming work from home expenses.
The ATO announced an increase to the fixed rate for working from home tax deductions that will see the claim amount increase from 52 cents to 67 cents per work hour. This new rule may increase the amount of money taxpayers can claim back from work related expenses.
H&R Block's director of tax communications Mark Chapman shared his advice for how to ensure you get the most from your tax return and avoid making common mistakes.
The 2022 - 2023 financial year ends on June 30.
Have your documents ready
The devil is in the details with a tax return and Mr Chapman said that gathering your documents early is the most important step on the road to a fruitful tax refund.
"Take the time out to gather all the information that you'll need to help you prepare the tax return, all of the invoices and receipts for work related expenses.
"Any bank and credit card statements that contain items of work related expenses that you don't have the receipts or invoices for. Because if you don't have the receipt in the first place, you won't be able to make the claim," he said.
A portion of your home-running expenses may be claimed as a tax deduction. The expenses that you may be able to claim include the work-related portion of with appropriate documentation include:
- heating, cooling and lighting of the home office room
- decline in value of home office furniture and fittings
- decline in value of office equipment and computers
- computer consumables, stationery, telephone and internet costs
Keep track of your work from home days
The new ATO rules require more rigorous record keeping of working from home arrangements.
"If you're going to claim the working from home deduction based on the fixed rate, you've got to make sure that you are actually complying with the new ATO compliance obligations in regards to that expense," Mr Chapman said.
"So you must have a record of every hour that you work from home, your timesheets or diary or roster. You've also got to have an individual invoice for each of the individual categories of expenses that are covered by that term 'working from home deduction'."
According to the ATO, records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour. So if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses.
If you need equipment for your home office, purchase it before the end of the financial year for an immediate deduction, these can be claimed for work items that cost $300 or less.
Make a super contribution
Making voluntary contributions to your super is a way to grow your balance and potentially reduce your tax, but there are limits to the amount of super you can contribute each year.
Concessional contributions are before-tax contributions and are generally taxed at 15 per cent. This includes the super your employer pays for you, and any super you salary sacrifice. The concessional contributions cap is $27,500.
Mr Chapman said super contributions should be encouraged.
"It's absolutely worthwhile if you've actually got the cash or if you can afford to make a personal contribution to super," he said.
"Everybody has the $27,500 allowance, which they can contribute to super and get tax relief for it. Your employer's contributions and your salary sacrifice contributions are included in that $27,500.
"However, the difference between your employers super contributions, your salary sacrifice contributions, and the $27,500 is potentially available for you make a personal contribution. By doing that you can claim a tax deduction for it."
If you earn $37,000 or less, you may be eligible for a low income superannuation tax offset of up to $500 per year.
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Check your industry specific deductions
Certain industries can claim items like clothing and shoes that are specific to work.
A pair of shoes purchased for work in a hospitality setting cannot be claimed because they are considered conventional clothing. However, a pair of steel capped boots worn for work by a builder or carpenter could be claimed as work related clothing on tax.
Mr Chapman said taxpayers frequently make mistakes when it comes to work related expenses.
"A lot of taxpayers make mistakes in relation to work related clothing," he said.
"The ATO estimates as small as six million taxpayers have claimed work related clothing in the past few years, and they think that's simply too high. So there are certain indications that people are claiming items of clothing they're not entitled to claim."
The ATO provides industry specific guidelines for claims. For example, a hairdresser can claim tools or equipment used for work, such as a wax pot, hair cutting tools or hair styling tools but cannot claim the cost to buy, hire or repair conventional clothes worn for work.
