How five minutes now can help net you a bigger tax refund

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Depending on when you read this, we’ll be almost exactly two weeks away from July 1, a date that comes with a tingling sense of anticipation for some (accountants, other nerds) and is absolutely meaningless for some others (almost everyone else). Where do I fit into that spectrum? I’ll never tell!

Nerd or not, July’s coming does mean we all need to start thinking about tax time (unless you’re retired and living off a tax-free income stream, in which case, this might not be of much use), and with two weeks to go, now is the time to prepare if you haven’t already.

For most of us, our tax is probably pretty set-and-forget, with not much changing year-to-year – or at least so we think.

What’s the problem?

But a recent survey from H&R Block showed while most of us believe our tax is easy, 71 per cent of us ran into at least one factor in the past financial year that complicated things. These include working from home, receiving government payments, making investments, having multiple income sources, or owning an investment property.

Often this occurs because when our work or living situations change, our tax habits often stay the same, as most taxpayers tend to stick with whatever worked last year. But this could mean you’re leaving easy deductions on the table.

What you can do about it

Taking the time now to think about and prepare for doing your tax this year can make all the difference. Here’s where to start:

• Know what’s in the ATO’s sights: Each year, the tax office highlights some areas it will be taking particular notice of come July, with things such as crypto and investment property income being common focus areas in years gone by. This year, the ATO says it will be keeping a close eye on work-related deductions and expenses and omitted income from non-primary sources, such as side-hustles and rental income. “We understand apportioning expenses can be tricky but don’t fall into the trap of thinking if you intentionally claim a little more than you are entitled to, it’ll fly under the radar and that the ATO won’t notice,” assistant commissioner Anita Challen said this year. When it comes to work-related expenses, the tax office says taxpayers should abide by three golden rules: it must relate to earning your income, you must have spent the money yourself and not have been reimbursed, and you have to be able to support your claim with records. If you intend to claim work from home expenses, it’s a good time to work out if you’re going to use the fixed-cost method (70¢ per hour you work from home) or the actual cost method, which requires you to track and record all the real costs you incur while in your home office.
• Get prepped: No one likes scrambling around for receipts when their accountant starts asking, so how about surprising them this year by having all your ducks in a row? Mark Chapman, head of tax communications at H&R Block, says the best thing taxpayers can do before July 1 is get organised, noting that while a lot of your information is automatically grabbed by the ATO, there are plenty of deductions that require your own records. Of most importance, he says, are records to back up any work from home claims, any interest or investment income records, and logbooks for any travel-related claims. “The earlier you start gathering information, the less stressful tax time becomes and the lower the risk of missing something important,” Chapman says. Finally, Chapman also warns that the ATO’s data-matching capabilities are improving each year, so don’t assume you’ll be able to fly under the radar or get away with something − you don’t want the ATO knocking on your door come August.
• Look out for the “warning signs”: If your tax affairs are straightforward, there’s probably not a huge amount to be concerned about, but Chapman says there are some “warning signs” to look out for that indicate you might have to take a little more care this year. These include having multiple jobs, owning a rental property, having sold shares or other assets, receiving foreign income, or if you have more deductions this year than usual. “Another warning sign is when a taxpayer finds themselves making assumptions,” he says. “If you’re guessing figures, estimating percentages or struggling to locate records, that’s usually a sign more work is required before lodging.”
• Make some last-minute deductions: Though the financial year is nearly done, you still have time to make a few moves to reduce your tax bill. As Money guru Julia Hartman wrote this week, a concessional super contribution can help reduce your tax bill, especially if you have unused caps from the past five years. If that doesn’t suit, how about a charitable donation? Australian Philanthropic Services chief Judith Fiander says there’s still plenty of time to make a donation and claim a deduction on your return this year. “Every day is a good day for giving. But the days between now and June 30 are exceptional days for giving,” she says.
• Don’t jump the gun: Finally, if all this prep has gotten you raring to go come July 1, some patience is (unfortunately) required. The ATO stresses each year for taxpayers to wait for a couple of weeks post July 1 before filing, to give its systems time to populate with all your income data from the past year. “One of the biggest myths at tax time is that the earlier you lodge your tax return, the earlier you’ll get your refund,” Challen says. “This actually isn’t true. In fact, one of the biggest mistakes you can make is not waiting for your pre-fill before submitting your tax return.”

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.