Tax time is approaching and for millions of Australians this year could deliver a nice bonus thanks to the boost of a tax offset announced in the recent federal budget.
From July 1, if you earn less than $126,000 you will receive a one-off tax offset of $420 and when combined with the low-and-middle-income tax offset (LMITO), single-income households will save up to $1500 on their taxes, while dual-income households will save up to $3000.
Before you get too excited about booking your first international trip in two years or updating your wardrobe now that your tracksuit can officially be retired, 2022 will be the last juicy tax return for millions of Australians for a while, with the LMITO coming to an end.
So, how can you maximise what you get back this year?
Tax accountant and founder of cloud-based tax software TaxTank, Nicole Kelly said “Paying more tax than you need to is giving money away, particularly at a time when the cost of living is increasing and interest rate rises are looming. It could also be a while before we see any significant tax cuts again for the everyday taxpayer.
I have worked as a CPA and taxation specialist for a long time and it continues to surprise me how many Australians don’t realise there are some very simple ways to maximise deductions to ideally maximise the amount of tax you receive back each year,” said Nicole.
Here are Nicole’s five top tips to maximise your tax return in 2022:
1. Stop treating your tax return as a once a year event
We are always looking for ways to cut expenses in our everyday lives, however tax as an expense is so often overlooked and it is actually one of your highest yearly outlays.
One of the best ways to maximise your tax return each year is to dedicate time each month, or if you can each week, to track your expenses and record any possible deductions.
2. Go digital and ditch the spreadsheet
There are so many different ways to manage and organise your taxes but it’s important to find the right solution for your individual circumstances, especially if you have investment properties or other incomes to keep track of.
Moving away from multiple spreadsheets and the box of faded receipts to software can be a gamechanger. Cloud-based tax software can be accessed anywhere and anytime with live feeds and built- in automation to organise all your incomes and deductions to deliver transparency of your tax position, and of course a stress free tax time.
3. Substantiate substantiate substantiate
According to the ATO, the number one cause leading to audit adjustments is when a taxpayer is unable to substantiate a claim. In fact, failure to substantiate netted the ATO their own tidy little bonus of $13.7 billion from the total 467,884 adjustments in 2019-20.
To avoid becoming an ATO statistic you need to keep your receipts organised and of course readable, and the best way to do that is to go digital.
Once again, cloud-based software will let you attach receipts to transactions straight from your live feeds, and store them for easy retrieval to accommodate any ATO requests now or in future years. It really is that simple to prevent unnecessary adjustments.
4. Claim what you are entitled to
When you work hard for your money, claiming everything you are entitled to and paying attention to the smallest details will maximise your return.
For all deductions, there are a few important boxes to tick:
- You must have a record to prove it
- You must have spent the money yourself
- You must not have been reimbursed for the cost
- The expense must be related to your job or other income-generating activity
- If the expense you are claiming is for both work and private purposes, you can only claim the work portion of the cost.
Using a tax management software with smart tax tools combined with up-to-date taxation rules and live data makes it easy to identify what you are entitled to claim, and even make proactive decisions throughout the year to actually control how much tax you pay.
5. Don’t rely on pre-fill data from the ATO
The ATO’s MyTax isn’t going to pre-fill my data incorrectly right? Wrong.
Filling the fields in MyTax with data from the ATO can seem like a shortcut but you should always check their info against your own. Many sources pass information onto the ATO as late as August which means your pre-fill data is out of date. If you do not pick up on this error, the onus is also on you. Using software with live feeds to manage your taxes throughout the year will provide you with the most up to date information for inputting into MyTax. If you aren’t feeling confident navigating MyTax on your own, you can always reach out to an accountant or tax specialist for assistance.