What to prepare for your 2021 tax return

thumbnail

The end of financial year is fast approaching, which means preparing early is key to being organised and on top of your tax return. For some, tax returns can be a bit more complicated if say you’re a business owner, have a lot of expenses to manage or receive income from multiple sources. As Benjamin Franklin once said, “by failing to prepare, you are preparing to fail” so getting organised early and being on top of what you can claim is one way to increase both your knowledge on tax time and your wealth.

We’ve listed below some areas where you may be able claim money back this end of financial year:

  1. Your Vehicle

If you use your own car for work purposes you may be able to claim some funds back, not including your commute to/from work as this is considered private travel. For those that are self-employed or run their own small business, you may be able to claim some additional expenses on vehicles, including interest on car loans, your car insurance premiums, registration fees and depreciation of the vehicle.

According to the ATO, you can claim a deduction for work-related car expenses if you use your own car in the course of performing your job as an employee – for example, to:

  • Carry bulky tools or equipment (such as an extension ladder or cello) that your employer requires you to use for work and there is no secure storage available at work
  • Attend work-related conferences or meetings away from your normal workplace
  • Deliver items or collect supplies
  • Travel between two separate places of employment, but not if one of the places is your home (for example, when you have a second job)
  • Travel from your normal workplace to an alternative workplace (that isn’t a regular workplace) and back to your normal workplace or directly home
  • Travel from your normal workplace or your home to an alternative workplace that is not a regular workplace – for example, a client’s premises
  • Perform itinerant work.

If you use someone else’s car for these work purposes you could claim the direct costs, such as petrol, as a travel expense. When you’re working out your claim amount, you have to log the costs of your vehicle expenses and keep receipts incurred including fuel and oil.

  1. Last minute deductibles

One common end of financial year strategy is purchasing last-minute work expenses to claim immediately as tax deductions in July. While it makes sense on paper, it also should be approached with caution as you’re still spending money when you don’t necessarily need to, that may not be in budget. However, if you’re planning on making the tax-deductible purchase in July or August, then it makes sense to fast forward it and purchase it in May or June for an instant claim.

  1. Donations

If you made a donation to a charity equating to $2 or more you may be entitled to claim a deduction, providing the donation was voluntary. As it goes with all other tax claims, you must keep a receipt as proof of the donation.

  1. Working from home expenses

If COVID-19 saw you working from home and you’re one of the many that continued to work from home as the pandemic has lessened, you may be able to claim a deduction for these expenses. Consider additional running expenses in the home that wouldn’t have occurred if you were in the office or that were required to power your working day such as electricity, phone expenses, internet expenses and the decline in value of equipment or furniture.

Be careful if your employer is giving you money to cover these work from home expenses – if that the case you can’t double dip and claim yourself. It’s best to have your accountant advise you on what charges can be claimed, however the below generally can’t be added:

  • Coffee, tea, milk and other general household items your employer may provide you at work.
  • The decline in value of items provided by your employer – for example, a laptop or a phone.
  • Any item your employer pays for or repays you for the expense.
  • Occupancy expenses such as rent, mortgage interest, water and rates.

Tips for next year:

  • To reduce your overall taxable income, consider voluntary superannuation contributions as money in your superannuation is taxed at a lower rate than the rest of your income.
  • Keep good records including all receipts of purchases you’d like to claim in a single folder and continually add to it. This will save you from sifting through your emails at the last minute and potentially forgetting some claimable expenses.
  • Claim your tax agent fees from the previous year. The fees you pay for tax return help are always tax deductible.
  • Keep record of how often you use your personal items to perform work-related activity such as making work calls with your mobile phone. Keeping an eye on this allows you to accurately report its usage at the end of the financial year and avoid any anxiety about misinformation.
left
Mobile
right
Mobile

SUBSCRIBE NOW

Be on the list that gets you from A to B. Want a holiday? Want to buy a
property? Want to know how to retire a millionaire? This is the first step...