Tax time can be a confusing part of the year for many Australians, let alone tax time during a pandemic where so many of our work lives and routine have been thrown into disarray. To help you navigate this year’s tax season we’ve put together an article to go through the basics of what you can and can’t claim, and a few handy tips on how to make the most of this time of year!
Please note that this article has been written with a focus on the 2021 tax season for individuals and families filing- not businesses. We have three previous articles on our blog that cover off the more basic tax information, you can find them here, here, and here!
First thing’s first- when do you need to lodge your tax return?
As an individual, you are required to lodge your tax return between the 1st of July and 31st of October for the applicable calendar year. For this year, it means you need to lodge between 1 July 2021 and 31 October 2021.
What happens if you don’t lodge on time?
You could be slapped with a fine by the ATO! Failure to lodge on time can carry a fine of over $1,000- so it’s best to lodge in time! If you are in a position where you may have have neglected your taxes for a few years then it may be worthwhile seeking out a qualified tax agent for guidance.
So, what are tax deductions? And what type of expenses can you claim a tax deduction on?
To put it basically: you are paying tax on your “taxable income”. To bring down your taxable income, you can claim eligible expenses. The more eligible claims you have, the lower your payable tax comes, and this should translate into more money back into your pocket from the ATO.
The ATO can vary the rules around what is an eligible expense each year, so what can you claim as a valid tax deduction in 2021?
Working from home expenses:
To claim a deduction for working from home, all the following must apply:
- you (personally) must have spent the money;
- the expense is directly related to earning your income; and
- you must have a record to prove it, such as a timesheet, roster, diary, or another type of document to validate the hours worked at home.
If all of the above apply, and you have been working from home for part of all of this past financial year then you are eligible to claim a tax deduction of household costs such as:
- Your home heating, cooling and lighting bills;
- The costs of cleaning your home working area (this includes cleaning products or payment for a domestic cleaner);
- The depreciation costs of your home office furniture, fittings, office equipment and computers;
- Small items such as furniture and computer equipment costing less than $300 can be fully claimed;
- Your computer and printer consumables and your stationery; and
- Any work-related phone and internet expenses.
Sounds a bit confusing? We know, it’s a lot! The good news is that the ATO has a handy shortcut to all of this: claiming 80c per hour you’ve worked from home. If you are confused about how to claim all of your work from home expenses, this could be a great way to cut through the confusion. However, taking this shortcut could mean you don’t get as much of a tax deduction as you are eligible for. It is worthwhile consulting a dedicated tax accountant in order to make sure you are getting the best possible tax return.
Career-Related Educational Courses
Another great tax deduction are self-education expenses, as long as the education relates to your current job or career path. You generally aren’t able to claim the first $250 of these self-education expenses, and there are criteria for the courses you can claim a dedication for. These criteria include:
- The education course either maintains or improves your knowledge or skills that you specifically require in your current employment; and
- The education course will result in, or is likely to result in an increase in your income from your current employment.
You cannot claim a deduction for self-education and study expenses that don’t have a strong connection to your current role.
Career-Related Subscriptions and Newsletters
Good news for those of you who want to keep up with your industry-specific news- you can claim a deduction for this!
According to the ATO, you are able to claim a tax-deduction for any books, periodicals and digital information that you use as part of your job; provided that you are the one who pays for the expense. These can be library subscriptions, academic journals, technical journals, online subscriptions, e-books or e-journals. If the item costs $300 or less you are eligible to claim it as an immediate deduction, provided that:
- The item is mainly used for earning your employment income;
- The item is directly related to your career/job; and
- The item has a total cost of no more than $300.
Do some good in the world, and get a tax deduction for it! To claim a tax deduction on a donation you make, it must meet the following four conditions:
- You must prove it is a “true” charitable donation- in that you do not receive anything material in return for the funds donated;
- The donation must be money or property, or financial assets such as shares;
- The donation was made in compliance with any applicable gift conditions for the specific charity or organisation; and
- The donation must be over $2 in value and you must have proof of the donation.
Bonus tax deductions:
- If you have joined a workforce Union you can claim up to $42 back on your tax deductions for the subscription or membership fees per year;
- Some investment-property related expenses; and
- Your appointment with a tax advisor to lodge your tax returns may be up to 100% tax deductible!
Other tax-deductible expenses that we covered in our previous blog posts that are still applicable in 2021
- Private Health Insurance;
- Personal Post-Tax Super Contributions;
- Super Co-Contributions;
- Net Medical Expenses Tax Offset; and
- Income Protection Premiums.
Confused? We’ve got you! We know that tax time can be a very confusing time of the year, especially if you are in a place in your life where you may have multiple income streams, an investment property (or two!) and other financial assets or liabilities. If you are seeking some guidance on how to correctly lodge your tax return this year, and what you can claim as a deduction- feel free to reach out to our friendly team for a chat!