5 tips to maximise your tax return in 2023
- Written by Mark Chapman, Director of Tax Communications at H&R Block Australia
About 14 million Australians submit a tax return every year, many of them – particularly those hoping for a tax refund – straight after the end of the financial year, during the months of July and August.
Here are H&R Block Australia’s top five tips to ensure you get your tax return right:
Don’t rely on pre-filled data from the ATO
With the push of a button on your computer, you can download a host of information about your income straight from the ATO. These days, many third-parties such as employers, banks and other financial institutions report the payments they’ve made to you straight to the ATO. This gives the ATO the ability to pre-fill your tax return with all the information they’ve received from those third parties.
But pre-filled information is only as good as the data submitted to the taxman. During July in particular, many taxpayers are shocked to notice that plenty of their income information doesn’t show up when they download data from the ATO. This is because many third-parties don’t pass on the data they are legally required to provide until well into July and in some cases August.
So don’t assume the income figures downloaded from the ATO are correct. Particularly if you are lodging early, always take your own information (income statements, etc) as the key source data.
If you omit income and get questioned by the ATO, the legal burden will be on you, even though you’ve taken the information straight from the ATO’s pre-filled data.
Don’t embellish deductions….
You’re entitled to claim a deduction for any expense which you incurred in earning your income. The key word there is incurred; you must have actually spent the money. So, don’t inflate deductions in order to get a bigger refund. Only claim for costs you can prove you incurred, by producing an invoice, receipt or bank statement for instance.
But do claim what you’re entitled to!
Let me repeat the opening sentence of the point above…you’re entitled to claim a deduction for any expense which you incurred in earning your income. So, if you actually have incurred a work-related expense, and you have the substantiation to prove it, don’t hesitate to claim it. Amongst the common deductions many taxpayers can claim are the following:
Costs of using your own car for work.
Costs of travelling for work.
Costs of tools and other equipment. For employees, items costing $300 or less are deducible in full, immediately. Items costing more than $300 are deductible over several years. If you’re in business, you can claim the entire cost of tools and equipment in full.
Costs of working from home. If you intend to use the ATO’s standard rate of 67 cents per hour, make sure you’re aware of the new compliance obligations, ie you must have a record of your time spent working from home and in addition you need to keep one bill or receipt for each category of expenses covered by the standard rate.
A good tax accountant will be able to tell you exactly what you can and can’t claim, minimising the chances of an audit.
Plan for next year!
When you’re busy trying to get this year’s tax return right, it might seem a little premature to think about getting next year’s return right…but the secret to making Tax Time easy is to plan ahead. If you end the financial year with all your receipts, invoices and other records tidily arranged, you’ll immediately be ahead of the game. So, as we head towards the start of the new tax year, remember if you spend money on anything as part of your job, get and keep the receipt. Even if you’re not sure if it’s deductible, if you at least have the paperwork you can get your accountant to advise you when the time comes to do your return.
There’s a reason 70% of Australians use a tax professional to prepare their tax return; tax is complicated! Get your tax return wrong and the comeback is on you, either with a lower refund or ATO penalties.
Most people find it far less stressful to simply pass on all their information to a tax accountant like H&R Block and leave it to them to complete their return, safe in the knowledge that the return will be accurate and complete. An experienced tax professional will usually be good at sniffing out those obscure tax deductions you didn’t know you could claim so they can often pay for themselves several times over.