Tax is the favourite subject of few people. However, if you don't consider your taxes all year and just fill out your tax return as quickly as you can, you might be missing out on some serious savings. Here's how the experts say you can get the most out of tax time, and reduce the amount you hand over to the ATO each year.
Claim work from home expenses
When you work from home, you're entitled to claim any additional expenses you incur. This might include electricity costs, home internet, stationery and office supplies, among other things.
Larger WFH related purchases (office chair for example or a laptop) can still be claimed, but generally through depreciation rather than all at once.
There are two ways to claim WFH deductions:
- Actual Cost. This means keeping a record of every work from home expense. You can only claim the portion of the expense that you use for work - for example you can't claim your whole internet bill if you're not using it for work in the evenings.
- Fixed rate. Since it can be time consuming and difficult to work out all your expenses exactly, the ATO also offers a flat fixed rate you can claim. As of the 24/25 financial year, you can claim 70 cents per hour worked from home.
Keep a car logbook
Similar to WFH expenses, there are two ways you can claim the cost you incur when you use it for work related purposes:
- Logbook method. This means recording every journey you make (including the destination and purpose) along with the odometer at the start at the finish. You need to keep receipts for fuel, along with any other expenses like registration or repairs.
- Cents per kilometre method. This means simply taking the number of work-related kilometres you travelled in a tax year and multiplying it by the rate per kilometre. For the 25/26 financial year, the rate will be 88 cents per kilometre.
Mark Chapman, Director of Tax Communications at H&R Block, says its vital to keep records regardless of which method you choose.
"If you use the log-book method, check that your log-book is up to date and that you have all the receipts, invoices and records of journeys which you will need to calculate and substantiate your claim," Mr Chapman told Savings.com.au.
"If you use the cents per kilometre method, you will still need a record of all work-related journeys during the year."
Take advantage of the 'super co-contribution'
If you're a low to middle-income earner, you might be eligible to have the Government make a 'co-contribution' if you make personal non-concessional super contributions.
Author of 101 Ways to Save Money on Your Tax - Legally! Dr Adrian Raftery, aka ‘Mr Taxman’ told Savings.com.au in 2021 he's surprised how few people take advantage of this 'free money'.
"If your income is under [the lower income limit] and you contribute $1,000 post-tax into super the government will match it 50 cents in the dollar," Mr said.
"Whilst this incentive gradually phases out above this figure at [the higher income limit], it’s free money!"
For the 25/26 financial year, the lower income limit is $47,488 and the higher limit is $62,488.
Offset capital gains against capital losses
Mr Chapman says investors should review their portfolios to see if there were any capital losses that could be offset against a capital gain.
"If you've disposed of shares or any other form of investment and you know you've made a capital gain, take a look at your investment portfolio and consider disposing of any assets which you own which you know are sitting at a loss," he said.
"Be careful though if you sell shares sitting at a loss and then buy them back in the new tax year. The ATO takes a hard line against so-called "wash sales".
"The ATO regards the purchase and the sale as effectively the same asset and have issued a Tax Ruling which states they can apply the anti-avoidance provisions to cancel any tax benefits and apply penalties."
Salary sacrifice into your super
Mr Raftery also told Savings.com.au depositing extra money into your super through salary sacrificing was one of the best ways to minimise your income tax bill.
"PAYG employees can make a lump-sum contribution at the end of the financial year to take them up to the cap and claim as a tax deduction," he said.
"Keep this in mind to start putting extra away when 1 July arrives."
The concessional contribution cap is currently $30,000.
Read more: What is salary sacrificing?
Claim for your mobile phone usage
Mr Chapman said if you used your personal phone for work, you can claim a deduction for the business-related use.
"Make sure you have your phone bills collected together and have kept a log of your business/personal use over a four-week period. That percentage can then be applied to the whole year."
Savings.com.au's two cents
Tax can be tedious and difficult, but being as tax efficient as possible might save you a lot of money. If you're doing your own tax return, it's important you claim everything you can (while not running afoul of the taxman by claiming something you can't).
If you want to make sure you're getting the absolute most out of your tax return, you could always hire an accountant to take care of it for you. They might make suggestions like salary sacrificing into superannuation and take care of all the complicated stuff for you. However, you should first make sure you're likely to save more than the cost of the accountant.
Bring forward next year's expenses
Dr Raftery recommended bringing forward expenses from the next financial year into the current one if you expect your income to be lower next time around.
"If you are expecting that you will have a lower income next year - due to factors such as maternity leave, redundancy, a smaller or no bonus or perhaps cutbacks to overtime - then why not try to bring forward your deductions into this tax year.
"Stocking up your home office with stationery, laptops and printers or prepaying subscriptions and interest for up to 12 months in advance are just some of the simple ways to reduce your income before 30 June."
Keep your receipts
"I'd like to emphasise the importance of keeping proper records, particularly for all of your work-related expenses. You need to keep a receipt or an invoice for all of those expenses.
Spend some time going through your books, making sure that you've actually got those expenses - all those receipts, those invoices. Otherwise, you're potentially losing out on a tax deduction.
So it is very important that you do keep those receipts and invoices, even if you might not ultimately be able to claim a deduction. It is worthwhile keeping them just so you can check with your accountant at our tax time."
Splurge on a business handbag
If your handbag or man bag is looking a bit worse for wear, Mr Chapman said splurging on a new one can be tax-deductible.
"If you use a bag for work, to carry papers or a laptop perhaps, you can claim a tax deduction for the cost. That could include a briefcase, a backpack or a handbag, whichever suits your needs."