The end of financial year is here, and before you lodge your tax return it’s worth making sure you’ve dotted your t’s and crossed your i’s to maximise your potential refund.
There are a range of factors that everyday Australians may be able to claim a tax deduction from. And, thanks to COVID-19 regulations seeing more people working from home than ever before, it’s crucial you know exactly what and how much you may claim.
Let’s explore how to maximise your tax refund this new financial year.
Australians who had to work from home due to COVID-19 restrictions in the last financial year will remember that they could claim more than they otherwise could have previously for the privilege.
In fact, ABC News noted that in 2019-20, around 8.5 million Australians claimed almost $19.4 billion in work-related expenses. Work-from-home expenses increased by 40 per cent during the COVID-related lockdowns.
According to the ATO, these additional expenses include:
- “Electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- Cleaning costs for a dedicated work area
- Phone and internet expenses
- Computer consumables (for example, printer paper and ink) and stationery
- Home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the
- Full cost of items up to $300
- Decline in value (depreciation) for items over $300.”
Items you cannot claim include general household items like coffee, tea or milk, costs of educating children, costs your employer has reimbursed you for or any time spent not working – such as lunch breaks or home-schooling hours.
For the 2019-20 income year, there were three main ways of calculating home office expenses: the shortcut method (80 cents per work hour) the fixed rate method (52 cents per work hour) and the actual cost method.
ABC News reporting found that one million Aussies used the shortcut method last year for their work-from-home expenses.
However, according to Ashley Debenham of ETax Accountants, if an individual works from home three days a week, on average they may be $580 better off using the fixed-rate method, as they will have to have “a dedicated workspace or office at home” to claim it
Comparatively, the shortcut method may suit those who work from home on a more casual basis. This is because this method requires less meticulous recordkeeping of home costs, as well as timesheets, rosters, or documents indicating the hours you’ve worked.
Work expenses also go beyond the new work-from-home world we've all had to get acclimatised to. Here are some of the stock-standard work-related expenses that Australians can consider claiming a deduction for:
- Vehicle and travel expenses – personal vehicle, ridesharing, flights, and public transport
- Clothing, laundry, and dry-cleaning expenses – must fall in categories of occupation-specific or protective clothing, as well as compulsory or registered non-compulsory uniforms.
- Self-education expenses – Course and tuition fees, home office costs etc.
- Tools, equipment, and other assets – computers, software, hand tools, safety equipment etc.
- Other expenses – Books, periodicals and digital informational, phone and internet expenses, income protection, overtime meals and more.
There are a range of expenses that Australians may be eligible to deduct, so it’s worth doing your research and looking at the full list on the ATO’s website.
Personal super contributions
Another area where you may be able to claim deductions is through personal super contributions made prior to July 1, 2021.
Personal contributions are separate to those paid by your employer, including the compulsory super guarantee, salary sacrificing and reportable employer super contributions. Instead, it refers to personal contributions made into your super fund from your after-tax income.
Keep in mind that you must meet the age restrictions, and you must provide your super fund with a “notice of intent to claim or vary a deduction for personal contributions” (NAT 71121) then receive an acknowledgement from your fund. If eligible, in your tax return you may claim a deduction for contribution stated on the notice of intent.
If you’ve never made personal super contributions, it’s worth keeping in mind as it may offer some benefits:
- Boosting your super – thanks to compound interest, any additional funds you add to your super balance outside of the standard super guarantee amount may make a serious difference in terms of the final balance at retirement.
- Government bonus – If you make after-tax contributions and your income is below $54,837, you may be eligible for the government to make co-contributions of up to $500 a year. Keep in mind that you may not be eligible for co-contributions on any amount claimed as a tax deduction.
For more information, please read RateCity’s guide to after-tax superannuation contributions.