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Tax Refund: 15 Ways to Maximise Your Tax Deductions in 2020

15 Ways to Maximise Your Tax Refunds in 2020

    1. Home Office Expenses ATO Covid-19

  • The ATO allows a temporary shortcut method for taxpayers to claim deductions for additional running expenses incurred as a result of working from home due to Covid-19. This method allows a deduction for all running expenses incurred from 01/03/2020 30/06/2020, at a rate of 80c per hour you carry out genuine work activities from home. These include:
    • Cleaning costs for the dedicated work area
    • Bills related to cooling, heating, and power
    • Ink, printing paper, and stationery
    • Depreciation of home office furniture i.e. desk, chair, computer, and printer,
    • Home line and wifi expenses.
    1. Tax Deduction on Donations

    Retain receipts of donations of $2 or more made to registered charity organisation and you can claim a deduction, to receive a bigger tax refund.
    1. Tax Deductions on Super Contributions

    Concessional contribution means super contribution from pre-tax income. This contribution is taxed at a 15% flat if your income is below $250k, otherwise you may be taxed of an additional 15% on top of part or all of the concessional contribution under Division 293. Speak to a friendly Melbourne Tax Accountants at Tax & Accounting House for more details.
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    1. Union and Membership Fees

    Union and professional membership fees are generally itemised on your income summary. A receipt is not required as long as you have that documentation to maximise tax refund.

    1. Salary Sacrifice / Salary Packaging

    Depending on your industry and package your employer provides, the most common salary sacrifice benefits are super, new car, insurance, computer, mortgage, rent, grocery etc. Salary packaging is a great way for employees to reduce tax & employer to retain the best staff, however, it triggers Fringe Benefits Tax (FBT), speak to your tax agent to know how these rules affect you.
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    1. Car Work-related Expenses

    If you use a personal car for trips between two jobs or sites on the same day and you have not kept a logbook, you can claim deduction using cents per kilometre method. This method allows a claim of 68 cents per kilometre at 5,000km max per financial year. You’ll need to provide how you work out your work kilometres by producing diary records of work-related trips.

    If you travel more than the 5,000km cap, you’ll need to keep a logbook which is easy using the ATO MyDeductions App.

    The ATO does not allow a deduction for travel trips from home-to-work and work to home, so do not be creative to maximise tax refund.

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    1. Uniforms and Protective Clothing

    You can claim a deduction of $150 for work-related uniforms and protective gearings such as the costs of buying branded uniforms, protective gear i.e. steel-cap boots and high-visibility clothing without receipts, for a higher chance of higher tax refund.

    1. Uniform Washing or Laundry

    If you wash, dry, and iron your uniform and protective clothing, the ATO considers a reasonable basis for working out your laundry claim as follows:
    • $1 per load – if each load contains only work-related clothing.
    • 50 cents per load – if private laundry items are included.
    1. Phone and Internet Bills

    If your employer needs you to use your phone for work, you may also be able to claim a deduction for only the work-related portion of the BILLS. The ATO requires you to keep records for a 4-week consecutive in each financial year, which can include phone bills and diary entries. Here’s an example of how to work phone plan or prepaid sim:
          • If the 4-week records reveal that you made 30 work-related calls over a total of 100 calls, then your work use is 30% =(30/100).
          • Work out your monthly phone bill, say $30pm.
          • Work out the total number of months you worked during that financial year, say 10months

    The calculation is:

          • Monthly work use = $9 = (30% x $30pm)
          • Yearly work use = $108 = ($9 x 10months)
    1. Claiming Phone on Tax

    If you use your phone for work, claiming a depreciation expense on the phone is a great example of “what can I claim on tax without receipts”. Mobiles have a life of 3 years. There are 3 methods of claiming:
          • Immediate depreciation if cost under $300, otherwise, use the one of the 2 methods below:
          • Diminishing = phone cost x no.days held / 365days x (200/3) x portion % of work use.
          • Prime Cost = phone cost x no.days held / 365days x (100/3) x portion % of work use.
    Note: You cannot claim a depreciation if your phone is on a phone and sim plan. Alternatively, you may claim under item 9 above.
    1. Get Private Health Insurance to Avoid Medicare Levy Surcharge (MLS)

          • You’re single and earn $90k or more pa; or
          • Your total combined family income exceeds $180k.
    If your Income for MLS Purposes (“IMLSP) falls under the above-mentioned threshold, the ATO will collect 1% on top of the compulsory 2% Medicare Levy. Below is an example of IMLSP components and how it’s calculated for a single taxpayer: –
    Taxable Income$70,000
    Total Reportable Fringe Benefits$30,000
    Family Trust Distribution Tax Paid-
    TOTAL INCOME FOR MLS PURPOSES$100,000
    Multiply MLS Rate1%
    MEDICARE LEVY SURCHARGE PAYABLE$1,000
    1. Prepay Expenses – Do not wait till the due date.

    Pay your income or business-related expenses in advance will reduce your Taxable Income. The ATO allows a deduction for prepaid expenses that are $1k or less and or meet the prepaid expenses 12 months rule.
     
    1. Use a Tax Agent.

    Everyone wants to get A BIG TAX REFUND or MINIMAL TAX BILL comes tax time. Free your time and this boring chore, engage a Registered tax agent as they’re the expert in the TAX FIELD. THEY’LL GET YOU A BIG REFUND & THEIR FEES ARE TAX-DEDUCTIBLE.
     
    1. Defer Income / Invoicing.

    If your cash flow is in good position, consider deferring invoicing until 1 July to avoid paying taxes in the current financial year. For this trick to work you need to bear in mind your tax brackets for both financial years, to ensure you don’t attract a higher rate in the next financial year on the deferred invoices.
     
    1. Utilise Income Tax Offsets aka Rebates

    Refundable and Non-Refundable tax offsets may reduce your tax debt if you’re eligible however they won’t issue you a refund. Here’s the list – dependents offsets, low income tax offsets, low & middle-income offsets, senior Australians & pensioners offsets, zone tax offsets, overseas forces tax offsets, maintained an invalid or invalid carer etc…
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    Record Keeping for Work-related Expenses

    To be approved for tax refunds, Receipts are Proof so get into the habit of keeping a record of your work-related expenses throughout the year. Download ATO MyDEDUCTIONS APP to capture all work-related expenses and mileage between two or more jobs throughout the year.
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