The Australian Taxation Office is the government agency responsible for administering tax law. They are responsible for collecting income tax, goods and services tax (GST), and other taxes on behalf of the Commonwealth Government. The ATO’s role is to ensure that taxpayers comply with their tax obligations under Australian law.
You can find out more about ATO’s website or by contacting them directly. However, regardless of whether you’re an Australian citizen living at home or abroad, you must understand how these taxes apply to your situation. This guide will cover some of the most common questions people have about their taxes in Australia.
The Australian government has a complex tax system that can be difficult to understand. The federal and state governments collect their own taxes, including income tax, goods and services tax (GST), and property taxes. This article is designed to guide those who may not know much about Australia’s taxation system or how it works.
Australia is a beautiful place with all sorts of different cultures and people. However, some intricacies come along with living in the country, like taxes. The best way to make sure you know what you’re doing regarding taxes in Australia is to read this guide!
It will walk you through everything from understanding your tax code to how much money you have leftover at the end of the financial year.
The goal is for everyone who lives in Australia–or even just visits–to be able to enjoy their time here without any worries about not knowing what they need to do when it comes time for them or someone they love getting taxed by Australian laws.
If you are an American moving to Australia, one of the first things you should do is find out about Australian taxes. Taxes are something that many people don’t think much about until they get a letter from their accountant or tax office.
This article will give you everything you need to know about Australian taxes so that your transition can be as smooth as possible.
Australia has both income and capital gains taxes, which means that if you have investments in America, these may also be taxed by the IRS at some point. If this sounds complicated, it’s because it is!
That’s why we’ve created this guide for new Australians who want to understand what they need to do when moving abroad in order to avoid any unpleasant surprises when filing their yearly return back home.
This blog post will help you navigate through Australia’s complicated tax system, identify your obligations as an individual taxpayer, and find out how to get in touch with the ATO if you need more information or assistance.
Tips to Paying Less Tax
1. To Donate
All donations to a registered charity of over $2 are tax-deductible, so it’s always a good idea to give. Donating is a meaningful way to spend your hard-earned money – the fact that it’s a tax deduction is just a bonus.
After you donate, you’ll get a receipt to file away, so when tax time rolls around, all you have to do is add up your charity receipts and claim away
Remember, when you get your refund, you won’t see your donations come back to you right away; instead, the amount will come off your taxable income. The donation will bounce back to you as a percentage.
2. Claim All
You can claim anything associated with doing your job. If the item you’ve purchased is half work-related and half personal, make sure you include the work-related part of your purchase in your tax deduction.
If you’re not certain an item is claimable, hold onto your receipt and let your tax specialist give you clarity. So you don’t miss out on any deductions, we always recommend holding onto your receipts and then if you can’t claim them – throw them out.
3. Timing Expenses
If you get all your expenses in before the end of June, you can claim them in this return and reap the benefits straight away. However, if you make the purchase post-July, you’ll have to wait a whole year until you can claim it.
Now’s the perfect time to pause and assess how you’re managing your money. If you’ve fallen behind or become lax with your documents and receipts, there’s still time to pull it all together to make sure you maximise your refund.
4. Investment Insights
Don’t rush into any investment – before you make a move, always talk to a financial planner. Every investment should give you an advantage now, as well as in the long term. There’s little purpose in saving a tiny bit of tax now if your investment goes on to lose your initial capital.
You’ll also have to pay tax on any shares you’ve sold or investments that you’ve made money from. Keep this to a minimum by reducing your assets that are sitting at a loss.
Be cautious of selling shares sitting at a loss and then purchasing them back when the tax year ticks over. The ATO is cracking down on this process, known as ‘wash sales’ and is instructed to cancel benefits falling under this category and issue penalties.
5. Expert Assistance
The more information you have about your tax, the better you can budget. When you’re putting together your tax plan, get advice from an expert accountant who specialises in tax.
Doing your research will ensure you can max your tax, so ask your agent about deductible expenses and get clarity around what you can and can’t claim. Often, they’ll be aware of deductions you’re not.
Tax Refunds: How to get the best ATO tax refund you can
1. Claim all the tax deductions you are allowed to claim
The easiest way to increase your tax refund: claim a deduction for every expense you are legally entitled to.
Do you ever pay for work-related things? If so, make sure you keep the receipt and a diary to document when or where you made the purchase.
A diary can also make it easy to help remember what project or job the purchase is related to. Even if you aren’t sure whether you can claim an item, keep your receipt anyway – your accountant can let you know if you’ve claimed everything correctly.
Tax deductions are the single easiest way to improve your tax refund. Still, it’s important to remember that you can only claim items that you have receipts for related to your work, and your employer hasn’t reimbursed you for them.
‘Made-up claims’ or ‘generous guesses’ can lead to ATO reassessments, audits and even tax bills arriving from the ATO. However, there are honest ways to increase your tax refund, and that’s what your tax agent will help you with.
2. Good tax refunds = good records and receipts
Australians spend countless hours tracking down receipts for purchases they made over the past 12 months at tax time.
Those people wasted hours of time – and probably missed out on hundreds or even thousands of dollars in their tax refund because they lost or forgot about receipts!
If that sounds like you… you might be missing out on deductions that can boost your tax refund.
Need help keeping track of receipts and deductions? Here are two great resources:
- A mobile app lets you save receipts and deductions, and snap photos into your tax return, all year round. You can use it right at the checkout, so you never lose or forget another receipt.
- Use a simple method to manage those receipts.
3. Sweat the small stuff to boost your tax refund!
A $20 donation to a charity or a $10 textbook might not seem like much at the time, but each of these small purchases across 12 months can add up to hundreds of dollars.
And all the amounts you claim as deductions can improve your tax refund! So get organised with your receipts for small purchases during the year, and it’ll pay off in the long run.
4. Use a tax agent service
A tax agent is a professional who’s on your side to help increase your tax refund and help you avoid ATO trouble.
Tax agents are here to help you. (On the other hand, the ATO’s main job is to collect taxes, not to boost your tax refund.)
Seventy per cent of Australian tax returns are lodged with a tax agent.
Tax agents are not all the same. For example, some tax agent companies leave your tax return to be handled by someone who may not even be a tax agent or accountant but more like a data entry worker.
Two separate people check your return, and they are both qualified accountants. If you have questions while using the website, you can get help anytime from friendly, qualified accountants.
9 Ways To Maximise Your Tax Refund
1. What to claim if you work from home
If you can wear ugg boots to work, you probably work from home, either full or part-time. If this applies to you, it’s worth noting that a portion of your home-running expenses may be claimed as a tax deduction.
The expenses that you may be able to claim to include the work-related portion of:
- heating, cooling and lighting of the home office room
- decline in value of home office furniture and fittings
- decline in value of office equipment and computers
- computer consumables, stationery, telephone and internet costs
2. Studying to improve your current career path?
If you’re up to your eyeballs in textbooks, the good news is you can claim them – along with course fees, accommodation and meals if you study away from home.
You can also declare costs of computer consumables and internet as well as depreciation cost of the computer used for studying. Bear in mind these course conditions:
- the course must have a sufficient connection to your current employment
- the course must improve specific skills or knowledge required in your current employment
- the course is likely to result in an increase in your income from your current employment.
3. Have proof of purchase for everything
We’re all familiar with those pesky receipts, but these are the same pieces of paper you need to keep if your purchase is work-related (even part-time). As an important aside, purchases made for work up to $300 don’t need a receipt.
Even though you may not need a receipt for purchases up to $300, you must have actually spent it in a way that is relevant to your employment – you cannot just claim $300.
4. Adios paper piles
The ATO has joined the digital age and has deemed electronic copies of receipts legitimate.
5. Claim a deduction for expenses incurred in earning your income
As a general rule, you can claim a deduction for any expense incurred in earning your income. Here are some typical deductions:
- transport from worksite to worksite, or when visiting clients or suppliers
- travel, meals and accommodation up to the amount actually spent. Allowances paid by employers are taxable
- tools and other equipment for work purposes (if used partly for private use, you can only claim the work-related portion).
6. Don’t exaggerate
7. Don’t rely on pre-fill data from the ATO
Even though filling the fields with data from the ATO may seem like a shortcut – it’s not. Without fail, you’ll be better off using your own info as your source data.
Banks may pass information onto the ATO as late as August, which leaves your data out-of-date. If the ATO highlights a problem, the onus is on you to correct it. Using a tax accountant to do your tax return can help.
The tax accountants undergo the most rigorous training program in the business, so they know how to get the details right and maximise each and every one of the returns they prepare.
8. Don’t forget the basics
The simplest of mistakes can hold up a tax return. To avoid a long wait, make sure you:
- get your details up to date with the ATO – if you lodge using a different address, for example, the ATO won’t be able to match it with your tax file number
- get your bank details in order, so your funds reach your account
- get your spelling right because one wrong letter can hold up your return
9.Be proactive and get organised
Come tax time, avoid ending up in a never-ending game of ‘find the receipt.’ Having somewhere allocated where you file your invoices and documents will make your job easier at the end of June.
What is DGR Status, and How Can The ATO endorse your Charity?
1. Is Being Registered as a Charity the Same as DGR Status?
Firstly, it is important to be aware that ACNC registration and DGR registration are two separate processes. Even if your not-for-profit registers as a charity, it does not necessarily mean it will have DGR status and vice-a-versa.
Even though the ACNC will collect information regarding your application and pass this on to the Australian Tax Office (ATO) for DGR endorsement, they will not decide whether it will be approved or not.
You do not need to be first registered as a charity to receive DGR status. However, certain types of charities must be a registered charity before receiving DGR status.
If you are unsure, you should review the table provided by the ATO, which sets out the various types of charities and their requirements.
The ATO oversees the DGR status application process, and they approve or deny registrations for DGR status. To receive DGR status, you must first fall into a category set out in the relevant tax law.
Second, you must check that you fall under either one of the two different types of endorsements – full DGR endorsement or part DGR endorsement.
Your charity might receive part DGR status because part of your charity, such as a particular operation you run, might be eligible for DGR status. Still, the charity or organisation as a whole is not eligible.
2. Requirements Once Status is Approved
In some circumstances where you have been endorsed concerning a part of your not-for-profit, you may be required to set up a gift fund.
A gift fund is a separate fund for the donations associated with that section of your non-profit. In some circumstances, a separate bank account is required to be set up. The gift fund can only be used for the “principal purpose” of the fund and not for any other purposes.
3. Key Takeaways
Once you are approved for DGR status, there are many regulations on the type of gifts you can receive and how you can use these donations. There are also regulations regarding these donations you receive, if your charity is wound up or if the ATO revokes your DGR status.
You might also be able to apply for additional charity tax benefits if you are a public benevolent institution, health promotion charity or charity for advancing religion.
Not all donations are tax-deductible
The Australian Taxation Office (ATO) reminds taxpayers to make sure they have a record of the donations they are claiming this tax time. Nearly two-thirds of the charitable claims adjusted last year were due to the taxpayer having no evidence of the donation.
1. The organisation receiving the donation or gift is not endorsed by the ATO as a deductible gift recipient (DGR)
Not all NFPs are DGRs, including crowdfunding campaigns that raise money for charitable causes and individuals in need. Donations to foreign charities and NFPs that are not registered as Australian DGRs are also not deductible.
2. The donation made includes an expectation to receive a monetary or personal benefit or advantage in return
Money spent buying a chocolate (fundraising chocolate), a raffle ticket, or an item from an op shop is not tax-deductible.
3. No records or receipts of the donation
The ATO accepts third-party receipts as evidence of a donation; however, if you made one or more donations of $2 or more to bucket collections conducted by an approved organisation for natural disasters, you can claim a tax deduction of up to $10 for those contributions without a receipt.
4. Testamentary gifts and workplace giving
A testamentary gift is a gift made under the terms of a will that does not become effective until the donor’s death. Testamentary gifts are generally not tax-deductible, and workplace giving would have already reduced the amount of tax paid in each pay period.
Some Unusual Tax Deductions in Australia
1. Adult Industry Workers
- These workers can claim a deduction for the cost of buying some clothing that is unique and distinctive to the job, including costumes and lingerie.
- They can also claim a deduction for stage make-up and products.
- The cost of classes taken to learn new dance skills is also deductible.
2. Australian Defence Force
- Military service uniforms are compulsory so that defence force members can claim a deduction.
- Personnel can claim a deduction for self-education expenses if the courses are likely to relate to the next promotion in the ADF.
- If there is strenuous physical activity in their duties, then fitness expenses can be claimed. But, unfortunately, you can’t claim your parachutist, submarine escape training facility, or unpredictable explosives allowances.
- Engineers can claim a deduction for the cost of protective items such as safety equipment and sunglasses.
- Technical or professional publications and professional association fees are also claimable.
4. Flight Attendants
- A deduction is allowable for the cost of purchasing luggage to the extent of the work-related use of the luggage.
- Staff may also be able to claim a deduction for the cost of making up cash or bar shortages.
5. Guards and Security Employees
- If they have a guard dog, they can claim a deduction for ongoing food, veterinary expenses and registration costs. However, the initial purchase of the dog is a capital expense.
- Guards can also claim a deduction for the cost of first aid training courses under some circumstances.
6. Hospitality Industry
- Gaming licence – you can claim a deduction for the cost of renewing this in the hospitality industry.
- Annual practising certificate fees can be claimed on renewal.
- Supreme Court library fees are deductible if due on an annual basis.
8. Mining Site Employees
- Machinery operating licences can be claimed in mining.
9. Nurses, Midwives, and Direct Carers
- Annual practising certificate fees are claimable on an annual basis in these professions.
10. Performing Artists
- A deduction can be made for commissions paid to theatrical agents.
- If you are a trapeze artist, you can claim fitness expenses.
- If your acting role requires contact lenses to alter eye colour or special spectacle frames, then you can claim them.
- Performers can claim a deduction for the cost of hairdressing specifically to maintain a required hair length or style as part of a costume for continuity purposes.
- A photographic portfolio used for publicity purposes can also be deducted.
- The ‘time usage cost’ of researching on the internet for a role is generally claimable.
- Discs and digital media used for rehearsal are also allowed.
- Performers also get to go to the theatre and see films that help them research.
- Bulletproof jackets and vests or body armour are deductible.
- Also, the interest on money borrowed to purchase such work-related equipment.
- Police dog training and maintenance is also covered.
12. Professional Footballers
- Shirts with club emblems and other suitable clothing or protective items are on the tax deduction list.
13. Real Estate employees
- People on commission can claim gifts given, e.g. a Christmas hamper, a bottle of whisky, wine, gift vouchers, a bottle of perfume, flowers, or a pen set.
14. Teachers and Educational Professionals
- Excursions, school trips and camps, for instance, a science teacher accompanies a group of Year 12 students on a camp to study the ecology of a rainforest.
- Teachers can also deduct the decline in value of their professional library (including books, DVDs etc.)
15. Travel Agent Employees
- It is common within the industry for sales staff to be offered discounted holiday packages and trips. Travel agents can claim a deduction for some trip expenses, but it needs to be work-related (unfortunately, not just a holiday).