Top "Tax Hacks" to get the most out of your 2018 return

Director Tax Communications, Mark Chapman, H&R Block

It’s peak tax season and over the next few weeks, millions of Australians will be going through the arduous ordeal of preparing their tax return in the hope of a speedy and substantial tax refund.

With 84% of taxpayers expecting a refund, and the average size of refunds last year reaching over $2,100, it pays to spend a little time and effort ensuring you’ve got every detail of your return right.

So what are H&R Block’s top tips for maximising your refund this year?

1.      Claim what you’re entitled to…

You’re entitled to claim a deduction for any expense which you incurred in earning your income. So, if you have incurred a work-related expense, and you have the paperwork to prove it, don’t hesitate to claim it. Amongst the common deductions many taxpayers claim are:

1. Costs of using your own car for work. This doesn’t include driving to and from work but it does include visiting clients or suppliers, and driving from one work-site to another
2. Costs of travelling for work. If you are required to work away from home, and you incur costs on meals and accommodation, those costs are deductible up to the amount you actually spent. If your employer pays you an allowance to cover your traveling costs, that allowance is taxable
3. Costs of tools and other equipment. Whether it’s the cost of tools if you are a tradie, or the cost of a new computer, laptop or mobile phone if you are office-based, if you spend it, you can claim it, provided it’s used for work purposes (if it’s used partly for work and partly for private use, you can only claim the work-related proportion). Items costing $300 or less are deducible in full, immediately. Items costing more than $300 are deductible over several years.
4. Cost of working from home. If you spend some of your time working from a home office, a portion of your home-running expenses may be claimed as a tax deduction. The expenses that you may be able to claim include the work-related portion of:

• heating, cooling and lighting of the home office room
• decline in value of home office furniture and fittings
• decline in value of office equipment and computers
• computer consumables, stationery, telephone and internet costs

5. If you’re undertaking a work-related course, you may be able the claim the costs of course fees – along with textbooks, accommodation and meals if you study away from home. You can also claim the costs of computer consumables and home internet as well as depreciation cost of the computer used for studying. Bear in mind these course conditions:

• the course must have a sufficient connection to your current employment
• the course must improve specific skills or knowledge required in your current employment
• the course must be likely to result in, an increase in your income from your current employment

A good tax accountant will be able to tell you exactly what you can and can’t claim, minimising the chances of an audit at a later date.

2.      But don’t embellish deductions….

You can only claim what you’ve spent. So, don’t inflate deductions in order to get a bigger refund and only claim for work-related costs you can prove you spent, by producing an invoice, receipt or bank statement for instance.

This year, self-lodgers using the ATO’s myTax program will be monitored as they prepare their return by the ATO’s computer systems to ensure they’re not over-claiming. The ATO will compare your claims to those of others like you and if your claim rings alarm bells, myTax will give you a stern warning inviting you to rethink that deduction.  Ignore that message, and you could be headed for an audit!

The ATO have already flagged that they’ll be cracking down on dodgy deductions for work-related expenses this year so if you want to avoid a possible tax audit, make sure you only claim what you’re entitled to.

3.      Don’t rely on pre-filled data from the ATO

These days, with the push of a button, you can pre-fill lots of your income information straight from the ATO’s systems. Take care though and don’t assume that income data is correct or complete. Particularly if you are lodging early, always use your own information (payment summaries, etc) as the key source data. Many third parties, such as banks, pass information about you to the ATO late in July or even into August so early lodgers will often find lots of data missing from their pre-fill.

Some people assume that because the data comes from the ATO, it must be right. That’s a dangerous assumption.

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.

4.      Don’t forget the basics!

Lots of tax returns get held up by the ATO because taxpayers have made basic mistakes like these:

• Name or address changed? Tell the ATO before you lodge your return. If you lodge under different details, the ATO won’t be able to match it with your Tax File Number. Delays will ensue!
• Not included your bank account details? The ATO doesn’t send out refund cheques these days so you need to include your bank details on your return. No bank details, no refund!
• Spelling mistake? If you’ve added an extra letter to a key field such as your name, that slip of the keyboard could consign your return to a black-hole whilst the ATO tries to manually match your details.

  5.      Get help!

There’s a reason 74% of Australians use a tax agent 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 agent and leave it to the agent to complete their return, safe in the knowledge that the return will be accurate and complete. An experienced agent 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.  Best of all, the tax agent’s fee is also tax deductible!