In 2021 Tax Tips

Are you looking for an easy way to prepare your 2021 tax return? You’re not alone! Thankfully, we’ve put together this guide on how to lodge and maximise your tax refund. Read on below for all the information you need! 

This blog post will provide you with an overview of preparing, lodging, and maximising your 2021 tax return. We will also cover the new rules for claiming deductions for work-related expenses that may affect you in the next year. 

If you are under the age of 65 for this tax year, you will likely have to lodge a tax return. While many people dread doing their taxes, some simple steps can be taken to make the process easier and maximise your refund. This blog post provides an overview of what you need to do before lodging your return, how to lodge it and why preparing now can help in the future.

To start off, it is important to understand what a tax return is. It’s basically a form that records your income and expenditure over one financial year to calculate any money owed or due. 

You are required by law to lodge a tax return every year unless there are special circumstances such as being bankrupt or having too low an income for this requirement.

If you’re wondering how to prepare for this, lodge or maximise your return, then read on. This blog post will give you everything you need to know, from understanding a tax return, the type of compulsory taxes in Australia, and some tips on lodging them with the ATO. 

It also covers all aspects of preparing for a successful 2021 income tax return, including an explanation of how deductions work, exactly when they can be claimed and what records should be kept. You’ll even find out what penalties apply if things aren’t done correctly! 

We know some people are worried about lodging their tax returns on time, so they shouldn’t worry because there’s plenty of time left. 

If you don’t have all your paperwork ready yet, then start gathering documents now so that when the deadline approaches, it will be easier for you to lodge your return online or through an agent.

Let’s get started!

Who needs to prepare and lodge a tax return?

There will be some people who won’t need to lodge a tax return. This usually includes those with lower levels of income and some older Australians.

Those who will have to lodge a tax return will typically have received income above certain thresholds or certain types of income.

If you’re unsure if you have to lodge a tax return, the ATO‘s online questionnaire can help you figure it out.

What documents do you need to lodge your tax return?

Some of the things you may need when lodging your tax return might include, but won’t necessarily be limited to:

  • Your tax file number
  • Your bank account details, so the ATO knows where to deposit any return you may be eligible for
  • Any payment summaries or income statements from your employers
  • Payment info from Centrelink (Services Australia) relating to assistance and relief packages
  • Details regarding any other sources of income (from business, property, investments or shares)
  • Receipts or statements for the expenses you’re claiming as deductions
  • Any private health insurance information you may have
  • Receipts from charitable donations if you’ve made any.

Note, if you lodge your tax return yourself using myTax, which is available through the myGov website and ATO app, most information from your employers, banks, government agencies, health funds and other third parties will generally be pre-filled for you by late July.

What tax deductions could you claim when you lodge your tax return?

Most tax deductions will be work-related. However, a work-related expense will only be deductible if your employer didn’t reimburse you. It directly relates to you earning an income, and you have a record, such as a receipt (unless the amount you’re claiming is $300 or less, in some instances).

1. Work-related tax deductions may include

  • Vehicle and travel expenses
  • Uniforms, as well as occupation-specific and protective work clothing, including footwear
  • Working-from-home expenses, including electricity, phone and internet costs. Note, a shortcut method for claiming these deductions will apply again this year (more info on this below)
  • Education costs relevant to your jobs, such as course fees, textbooks, memberships and subscriptions
  • Tools and equipment, such as sunscreen and sunglasses if you work outside, or laptop and relevant software if you work in an office or home office.

See the ATO‘s occupation and industry-specific deduction guides for more information on deductible items related to your specific industry.

Meanwhile, if your expenses are for both work and personal use, you can only claim a deduction for the work-related portion, which could, for instance, be 50% of your phone and internet bundle.

Another example might be if you go on an interstate study trip or conference but are taking a holiday at the same time, you wouldn’t be able to claim the entire trip as a work-related expense.

2. Additional deductions you may be able to claim

Suppose you’re having trouble keeping track of all your receipts, checkout the myDeductions tool in the ATO app. This allows you to save a record of your deductions throughout the financial year, which you can then upload at lodgement time.

Extra info if you’re claiming working from home deductions this year

The ATO has announced that a ‘shortcut’ method will again apply as an option for calculating relevant tax deductions for anyone who has worked from home during the financial year (1 July 2020 to 30 June 2021).

What this means is you can claim 80 cents for each hour you worked from home to cover any eligible tax deductions (noting, you may need proof such as a timesheet) rather than doing calculations for specific items.

As the shortcut is ‘all-inclusive’, you can’t claim the shortcut and then claim for personal expenses, such as phone and internet bundles. However, if you wish to, you can still claim under the existing arrangements.

Aside from the shortcut method, a fixed rate method (52 cents per hour you work from home) may allow you to claim other deductions, or the actual cost method can be used. 

Check out the ATO‘s home office expenses page for details, as further research may be required if you’re considering an existing method.

Should you lodge your tax return yourself or use a tax agent?

You can lodge your tax return yourself free of charge via MyTax, accessible through the myGov website and ATO app, or you can complete a paper tax return or engage a registered tax agent to do it for you, which will incur a fee that’s typically tax-deductible.

1. Lodging your tax return yourself

If your finances are relatively simple, you might consider lodging your own tax return (which you’ll need to do by 31 October). As mentioned above, a lot of information will also be pre-filled for you by late July.

2. Engaging a registered tax agent

If you do want to use a registered tax agent to prepare and lodge your tax return, it’s important to note you will pay a fee for their service, but it’ll typically be deductible next financial year.

Note, you should make sure your tax agent is registered with the Tax Practitioners Board (TPB). You can find a registered tax agent or check whether a person is registered by visiting the TPB website.

If your finances are more complex, using a tax agent may provide you with peace of mind, as it could save you time, highlight deductions you didn’t know about while making sure all your claims are legitimate.

On top of that, most registered tax agents have a special lodgement program, which means they can often lodge returns for their clients after the usual 31 October deadline. Still, you’ll need to contact them beforehand.

How to Maximise Your Tax Refund in Australia

1. Be Organised And Claim What You’re Entitled To

Take the time to carefully prepare all your documents like payslips, receipts for work-related expenses, bank statements, logbook entries and summaries of your payments. 

It doesn’t matter if you’re relying on a tax agent or doing the work yourself, maintaining a spreadsheet detailing your expenses makes working out your spending more manageable. 

To ensure accuracy from the beginning, download the Tax Checklist to stay in the know about what to gather to ace your return.

If you have spent money on something as part of your work and have the paperwork to prove it, claim it. Common deductions many taxpayers claim include:

  • The costs of using your own car for work do not include driving to and from work.
  • Costs of travelling for work. If you must work away from home and spend money on meals and accommodation, those costs are often deductible.    
  • Costs of tools and other equipment. Items costing $300 or less are deductible immediately. Items costing more than $300 are deductible over several years. Items you could claim include tools for a tradesperson, a laptop for an office worker or even a handbag or briefcase used to carry work papers.

And don’t worry about storing messy piles of paper receipts: the ATO is okay with unedited scanned copies. Just remember to save your documents and receipts for the full five years that the ATO requires.

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2. Work From Home Expenses

With the pandemic-induced lockdowns over the past 18 months, it’s important to know what you can and can’t claim for working from home – and a good way to boost your returns if you do it right.

But the long and short of it is if you work from home, you can claim a tax deduction for the work-related proportions of household costs such as:

  • Heating, cooling and lighting bills
  • Costs of cleaning your home working area (including cleaning products or payment for a domestic cleaner if required)
  • Depreciation of home office furniture and fittings
  • Depreciation of office equipment and computers
  • Costs of repairing home office equipment, furniture and furnishings
  • Small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately (they don’t need to be depreciated)
  • Computer consumables (like printer ink) and stationery
  • Phone (mobile and landline) and internet expenses

Ideally, you should have a specific room set aside as a home office. However, if you are using a room with a dual purpose or a room shared with others, you can only claim the expenses for the hours you had exclusive use of the area.

However, to streamline the process, the ATO has created a shortcut method to make it easier because so many Aussies haven’t been able to attend the office since last year.

The ATO has introduced a temporary ‘shortcut method’ of calculating additional running expenses allowing those working from home to claim a rate of 80 cents per work hour during the coronavirus crisis.

You will need to record the number of hours you have worked from home as a result of COVID-19.

However, it should be noted that if you use the 80 cents per hour method, you can make no other claims concerning working from home. So, items like mobile phone and internet usage are included in the 80 cent rate.

3. Make Sure You Provide Accurate Information

You can only claim what you’ve spent. So don’t inflate deductions in order to get a bigger refund and only claim for costs you can prove you spent by producing an invoice, receipt or bank statement.

Also, make sure you correctly declare all your earnings, including investment property gains, any foreign income or earnings resulting from cryptocurrency trading. Be careful with your details because the ATO has access to a vast range of data sources to validate the data you’ve provided.  

Everything from financial institutions and banks to government agencies can be called upon to clarify your claims. If the numbers don’t add up, the ATO will question your tax return.

4. Make A Charitable Donation

Did you know that you can make a charitable donation and get the money back at tax time?

Doing good makes you feel good and, as an added bonus, can boost your tax return.

According to the ATO, to claim a tax deduction for a gift or donation you make, it must meet the following four conditions:

  • Must truly be a gift or donation – that is, you are voluntarily transferring money without receiving, or expecting to receive, any material benefit (that is, anything that has a monetary value) or advantage in return.
  • Must be of money or property and can include financial assets such as shares.
  • Must comply with any relevant gift conditions – for some authorised charitable organisations, the income tax law adds different conditions affecting types of deductible gifts they can receive.

The donation must be over $2 in value, and you must have proof of the donation.

Additionally, if you make “bucket donations”, that is, putting money into a donation bucket from a reputable organisation, you can claim up to $10 of donations without needing a receipt.

However, the ATO warns that not all charities are among the accepted organisations. For example, crowdfunding websites like Kickstarter are not accepted.

5. Don’t Rely On Pre-filled Data From The ATO

You can pre-fill lots of your income information straight from the ATO‘s systems. But don’t assume this income data is correct or complete. 

Many third parties, such as banks, don’t pass information about you to the ATO until late July or early August, so early lodgers who use the ATO’s myTax system will often find lots of data missing from their pre-fill.

If you omit income and get questioned by the ATO, the legal burden is on you, even though you’ve taken the information straight from the ATO’s systems.

Most tax accountants won’t rely on pre-filled data but work from your own source documents. This minimises the chances of missing income data for those who prefer to lodge early.

6. Sign Up To An Educational Course

You can also claim a deduction for self-education and study expenses if the education relates to your current job.

According to the ATO, you generally can’t claim the first $250 of expenses for your self-education.

Again, there is certain criteria you must meet, and the course must have a “sufficient connection” to your current job plus one of the following:

  • maintains or improves the specific skills or knowledge you require in your current employment
  • results in or are likely to result in an increase in your income from your current employment.

However, the ATO warns you can’t claim a deduction for self-education and study expenses for a course that doesn’t have a sufficient connection to your current work activities or only relates in a general way to your current employment.

For example, you can’t claim a deduction for a full-time fashion photography course if you’re working as a casual sales assistant on the weekends.

Additionally, you cannot claim courses of study that will change your career path. This means if you’re a nurse, you can’t make a claim for a study that will lead to you becoming a doctor, the ATO explained.

7. File Online

With most of us trying to fit more and more into our 9-5, we need services to work around us. During tax time, life can be even more frantic, and that’s why we work outside business hours so you can get your tax done and dusted by lodging online or in person at any of our 470 offices.

To access an expert online, use an Online Tax Adviser and get your return lodged ASAP. 

After you’ve carefully reviewed all your relevant details and tax documents, upload them, and an Online Tax Adviser will get busy getting your return ready to maximise your refund. 

As they work, an expert will contact you via their secure and safe online platform so that you can stay up-to-date with how your return is progressing. 

Or, if you’re a little more comfortable in the driver’s seat, you can opt for a self-service Online Tax Express Return and lodge anytime, anywhere.

8. Sign Up For Newsletters And Subscriptions

Again, this has to be industry-specific, but you can sign up for access to industry-specific news if you work in a certain industry.

The ATO outlines that you can claim a deduction for books, periodicals and digital information you use as part of your job if you are the one who incurs the expense.

Books and periodicals include library subscriptions, academic journals, technical journals and reference books.

Digital information services can include online subscriptions, electronic material, such as e-books or e-journals and other digital materials that you might buy.

The ATO said if the item costs $300 or less, you can claim an immediate deduction so long as the item:

  • is mainly used for earning your employment income (not from carrying on a business)
  • is not part of a set of assets you acquire in the same income year, where the total cost of the set is more than $300
  • is not one of several identical or mostly identical items you acquire in the same income year that together cost more than $300 – that is, you can’t buy a round of subscriptions to a magazine for you and your mates and claim the whole thing.

So, if there is an industry magazine that has caught your fancy, now would be the right time to sign up so you can claim the cost back.

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9. Sign Up For That Union Or Organisation

If you work in an industry that is part of a union but hasn’t joined yet, now is the time to do it.

The ATO outlines that for the industry you work in, you can claim a deduction for:

  • union fees
  • subscriptions to trade, business or professional associations
  • the payment of a bargaining agent’s fee to a union for negotiations concerning a new enterprise agreement award with your existing employer.

The ATO specifies that you can also claim up to $42 per income year for the cost of each subscription you incur for membership of a trade, business or professional association where it’s not in direct relation to earning your employment income.

Most unions and associations send their members a statement of the fees or subscriptions they pay, so check these before signing up.

10. Get Expert Help

Get your tax return wrong, and the comeback is on you, either with a lower refund or ATO penalties. Most people (74% of all Australians!) find it far less stressful to leave it to an agent to complete their return. 

This ensures the return will be accurate and complete, whilst an experienced agent will usually be good at finding obscure tax deductions you didn’t know you could claim.  

Plus, a maximum guaranteed refund means you go all out to ensure your paperwork is in top shape. In the rare case you discover you’re due a different refund amount, they’ll repay your preparation fee, as well as file an amendment with the ATO

After you’ve lodged – log in online for an update on how your return is progressing; access from anywhere means tax time is less of a stress.

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