It’s tax time again, and there’s much to look out for when lodging your return. Knowing what you can and can’t claim and what information you need on hand is never easy.

Here’s a quick guide to claiming what you’re entitled to and avoiding the common mistakes taxpayers make when filling out returns.

  1. Disclose all your earnings

Your income data is usually pre-loaded straight from the Australian Taxation Office (ATO) into your online tax return but remember to always check if this information is correct and no sources of income are missing.    

Some types of income might need to be added by you, such as share dividends, bank interest, compensation, insurance payments, cash jobs and Airbnb earnings. Keep in mind that the pre-fill data mightn’t yet be loaded if you lodge your return before the end of July.

Avoid guessing or estimating income as you never know what records ATO has access to, and the last thing you want is to have your return flagged for investigation. This year the ATO is singling out taxpayers with cryptocurrency assets, warning they must report capital gains and losses in their return.

  1. Be realistic with your work-related costs

With our homes doubling as offices, it’s crucial to take the opportunity to be reimbursed for your out-of-pocket work-related expenses. So, what exactly can you claim? First, there are the recognisable deductions like the work-related portion of:

  • your phone bill
  • electricity
  • internet
  • cleaning
  • home office equipment
  • uniforms
  • printer paper, ink cartridges and other work tools.

Then there are the less obvious deductions, like:

  • sunscreen
  • sunglasses
  • handbags!

And then there are the expenses you aren’t allowed to claim:

  • coffee, tea and milk or any other general household items your employer may have provided at work
  • home to work travel, regular clothes or personal phone calls
  • resources or equipment for your children’s online learning
  • the decline in value of items provided by your employer, such as a laptop
  • anything your employer has already paid you for.

If you’re self-employed and working from home, you can claim a portion of costs like rent or mortgage, but this isn’t permitted as part of your work-from-home deductions.

The rules of thumb for whether an expense is deductible is that it needs to be connected or related to your job or income and hasn’t been reimbursed by your employer. The cost must also be substantiated, so keep any receipts or bank statements that prove how much you’ve spent.

  1. Claim your work-from-home hours

It can be tricky to keep track of every little work-from-home expense, especially since the pandemic has seen us all flit between home and office at a moment’s notice. To help out, the ATO introduced a temporary tax “shortcut method” in April last year. It’s still applicable for the financial year ending 30 June 2021, and it means you can claim 80 cents per hour you worked from home.

It doesn’t matter that you might be working from your lounge or kitchen bench, as a dedicated work area isn’t required.

The shortcut method covers all deductible running expenses, including the decline in value of your computer or capital items like home office furniture. You can’t claim any more work-from-home expenditures on top of this. You also need to document the hours you worked from home using a diary, timesheet, roster, or similar. Be sure to exclude any time you took a break, perhaps for lunch, a stretch, walking the dog or having a cuppa.

If you’ve kept all your receipts, have a dedicated work area, and think you would be better off financially to claim the work-related cost of each expense, you may want to opt for the ATO’s fixed rate method or their actual cost method.

  1. Keep receipts

It’s wise to keep receipts or invoices for every single claim you make. Although the ATO doesn’t always require receipts for small claims, they may ask you to show how you spent the money and how you calculated the claim.

ATO rules about receipts vary from expense to expense. For example, to claim a deduction of over $50 on your phone and internet, you must keep your bills for the year and show how much is related to work. But for the dry-cleaning of occupation-specific clothing, you don’t need a receipt for a claim under $150 (but you will still have to show how you calculated the claim).

For those of us who don’t have the time or energy to keep track of these differences in receipt-keeping rules, it’s far simpler to get in the habit of keeping all receipts. The ATO has a record-keeping tool called myDeductions that allows you to keep track of your receipts by taking a photo of them and uploading them at tax time to your agent or myTax.

If you don’t have all the receipts for this year’s return, you may still be able to claim a deduction if you can show the ATO evidence of spending the money, such as a bank or credit card statement that details the amount paid, when and to whom.

The ATO states that if your total claim for all work-related expenses exceeds $300, you must have written evidence. Receipts must be kept for five years from when you lodge your tax return in case you are asked to substantiate your claims.

  1. Have your documents at the ready

If you can wait until the end of July to lodge your tax using ATO’s myTax, you will find a lot of information has been pre-loaded into your return. This data comes from employers, banks, government agencies, health funds and third parties. JobKeeper payments are included in this pre-fill.

Alternatively, here is the type of information you will need to have on hand when lodging your tax return.

  • Tax file number
  • Bank account details for the ATO to transfer any refunds
  • Income statement from your employer or payer
  • PAYG payment summary
  • Government agency letter detailing any government pensions, allowances or payments
  • Financial institution statements showing any interest income
  • Dividend statements
  • Evidence to substantiate your claims for deductions
  • Receipts for charitable donations

You have until 31 October 2022 to lodge your tax return or longer still if you’re using a registered tax agent.

As part of sorting out your finances for tax, make a note to also check your all important credit scoreIf it needs improving, you may want to use some of your tax refund to get on top of any debt or your upcoming bills.

Remember! The higher your score, the higher your chances of potentially securing a better deal when it comes to credit applications. So, make it a habit to regularly track your credit health and work towards improving your credit score into the new financial year.

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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional financial advice.