How to maximise your tax return: talking tax with Tammy
Do you wish you could find ways to maximise your refund each year? The key to maximising your tax return is to be proactive and organised. This means keeping track of all your expenses and taxable income, understanding the deductions and credits available to you, and taking advantage of any tax-saving opportunities that come your way.
In researching this article, I spoke with Claire van Malland, a qualified accountant and senior manager from the accounting and consulting firm EY in leadup to tax season. Claire is a chartered accountant, as well as a senior tax manager and Tax Institute Australia member. Together, we went over some tips for maximising your income tax return.
How to get more on your tax return
Before we get into the list, one of Claire’s top tips for getting more on your tax return is to keep track of all of your expenses through an automated budget. In addition to personal expenses, this can include any work-related expenses such as travel, equipment and supplies, as well as any charitable donations or medical expenses.
By keeping accurate records of your taxable income and regular expenses throughout the year, you’ll have a better idea of what you can claim as tax deductions come the end of financial year and potentially get a larger refund. Just be sure to keep all receipts and documentation to support your claims.
Now, on to the list:
Make sure you claim all of your deductions
Potential deductions for donations, tax agent fees and associated costs (including travel to and from your tax accountant’s office), union fees and registration, uniforms and laundering, protective equipment, and home office expenses are all worth bringing up to your tax accountant. If you’re curious, the Australian Tax Office (ATO) provides a full list of deductions you can claim.
Don’t underestimate your home office expenses
Now that we’re all much more equipped to work from home, it’s now easier to calculate home office expenses, but you might end up with a higher deduction at tax time using the fixed rate or actual cost method, especially if you bought some expensive items (eg. office chair, printer, internet costs, mobile phone expenses, home office supplies and any other related additional expenses).
Work-related protective equipment and self-education
When it comes to work-related expenses, uniforms, protective clothing, equipment and consumables may all be deductible, so long as the costs are not reimbursed by your employer. For example, teachers who frequently work outside may be able to claim a hat, pair of sunglasses and sunscreen. If you work with a laptop, you could even consider buying a bag/backpack that fits it.
You can also claim self-education expenses, but only if it has a sufficient connection to earning income from your employment activities. That means that you likely won’t be able to deduct the costs of a course on aviation while solely working in project management–sorry to be the bearer of bad news.
FURTHER READING: Small business tax planning: A checklist of what to do at tax time
Keep your receipts
You can claim up to $300 without receipts (except for dry cleaning), but if your work-related expenses are higher, you’ll need to provide proof of purchase. Paper, printer ink, internet expenses, virus protection subscriptions, mobile phone expenses, and so on–they quickly add up. Wondering how to manage your receipts? Well…
The ATO app includes an expenses tool called ‘My Deductions.’ It allows you to photograph and categorise expenses throughout the year and then download a summary at tax time. How handy is that!
Do your tax return online
If your tax is pretty straightforward, you may be able to save yourself anywhere from $100 to $800 on tax agent fees by doing your income tax return online yourself via the ATO website. It’s called ‘myTax’ and, by all accounts, it’s very easy to use.
Smart ways to use your tax refund
Assuming you’re one of the four-out-of-five, a nice little budget booster may not be far away. So, what are you going to do with the money? Below, I’ve put together some pros and cons of spending, saving or investing your refund. But ultimately, it comes down to your financial goals and budget.
from money worries
Create your own budget plan designed to help you live the life you want
Go on a spending spree
Spending your tax refund isn’t a bad thing if you’re shopping for things you really need. And because you’ll be paying with cash, you may be able to drive an even harder bargain. Make sure you shop around.
FURTHER READING: What’s the best way to invest your tax return?
Pay it off your credit card balance
According to Finder, the average credit card balance in Australia in 2023 is $2,991, having increased by $190 since 2021. With the average tax refund being approximately $2,800 (according to H&R Block), that means that the average tax refund could all but eliminate your credit card debt. By comparison, if you were to make only minimum monthly repayments on a credit card balance of $2,801, it would take more than nine years and $3,400 in interest to pay it off.
Lump sum home loan payment
On a $500,000 mortgage at 5.73% interest per annum, making a single lump sum payment of $2,800 halfway through the life of the loan would cut $3,800 (two months) off a 30-year loan. Not bad, but do the same every year and you’ll save tens of thousands.
Build up your emergency fund
If the recent years have taught us anything, it’s to be prepared! The way to build up an emergency fund over time is to transfer small amounts of money from every pay into a dedicated emergency fund savings account. But using your tax refund is a great way to give your emergency fund an instant boost.
Boost your super fund
When you put some (or all) of your tax refund into your super fund, you’re paying it forward to your future self. The longer you have to retire, the more time that money has to grow. The tax refund super contribution of today might become the European river cruise of tomorrow! Just be sure to budget for all those future travel expenses.
If you’d like to see what sort of change your annual tax refund could make to your finances, give us a call on 1300 300 922 or enquire online. Our money coaches would love to make a free customised budget for you.
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