Get your taxes right, or else: ATO

Get your taxes right, or else: ATO

The Australian Taxation Office has warned it has the tools to catch people who file incorrect claims for work-related expenses at tax time.

The ATO said it would use real-time data to compare taxpayers with others in similar occupations and income brackets.

The aim is to identify higher-than-expected claims related to expenses including vehicles, travel, internet, mobile phones and self-education.

There are three golden rules for taxpayers to remember, according to the ATO:

  • You have to have spent the money yourself and can’t have been reimbursed
  • The claim must be directly related to earning your income
  • You need a record to prove it

Work uniforms are a common trap

Assistant commissioner Kath Anderson said many taxpayers don’t fully understand what deductions they can claim.

“Some taxpayers even think that you can make a standard claim of $300 without having spent the money,” she said.

“You don’t need receipts for claims up to $300 but you must have actually spent the money, and be able to show us how you worked out your deduction if asked.”

Ms Anderson said deductions for work uniforms are a common trap for employees at tax time.

“It’s a myth that you can claim everyday clothes, for example black pants and a plain white shirt, even if you only wear them to work and your employer says you have to,” she said.

“To legitimately claim your uniform, it needs to be unique and distinctive, such as a uniform with your employer’s logo, or be specific to your occupation and not for everyday use, like chef’s pants or coloured safety vests.”

11 deductions you (probably) can’t claim

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Here, in the ATO’s own words, is a list of things you probably can’t claim on your tax return:

1. Trips between home and work. Generally you can’t claim a deduction for these because they’re considered private travel.

2. Car expenses for transporting bulky tools or equipment, unless:

  • you need to use your bulky tools to do your job
  • your employer requires you to transport this equipment
  • there is no secure area to store the equipment at work.

3. Car expenses that have been salary-sacrificed.

4. Meal expenses for travel, unless you were required to work away from home overnight.

5. Private travel, so if you take a work trip that includes personal travel you can only claim the work-related portion.

6. Everyday clothes you bought to wear to work (such as a suit or black pants), even if your employer requires you to wear them.

7. A flat rate for cleaning eligible work clothes without being able to show how you calculated the cost.

8. Higher education contributions charged through the HELP scheme.

9. Self-education expenses when the study doesn’t have a direct connection to your current employment – your future or dream jobs don’t count.

10. Private use of phone or internet expenses – only the work-related portion counts.

11. Up-front deductions for tools and equipment that cost more than $300. However, you can spread your deduction claim over a number of years. That’s called depreciation.

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Learn more about savings accounts

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria