ATO refunds: Five tips for bigger personal tax deductions

The tax man will be looking closely at deductions this year, but there are several key way Aussies can boost their refunds.

Tax time is just one month away and pressure is mounting on individuals to act now if they want to grab the largest possible refund.

Work-related deductions, donations and superannuation are key areas where people can boost their deductions by making some moves in June.

More than 40 per cent of taxpayers received a refund above $1000 last year, according to new research by H & R Block, but it is warning that many are overconfident after a crazy Covid-19 year working from home.

H & R Block director of tax communications Mark Chapman says many people “don’t really appreciate that the ATO is going to be cracking down on workers”.

“Last year their staff were all tied up with JobKeeper - this year they have done a complete 180 and are putting money into compliance,” he says.

If you get your numbers right, there’s handy cash to be made by acting before June 30.

1. PREPAY FOR THINGS

Chapman says prepaying expenses before June 30 can trigger bigger deductions in areas including professional subscriptions and insurance premiums for investment properties and income protection.

Mr Taxman founder Adrian Raftery says professional memberships can also be paid before June 30.

“And if you are going to a conference later in the year you can pay for it before June 30,” he says.

Interest on investment loans can be another nice prepayment.

Susie Taafft sorts out her superannuation tax deductions early. Picture David Clark

2 WORK-RELATED PURCHASES

Need to buy something for your job or home office? Do it now and claim a deduction for it in July.

The ATO offers a shortcut method for home office deductions, where people can use a flat rate of 80c an hour for every hour worked at home.

However, Raftery says other approved claim methods where actual costs are recorded and deducted will deliver bigger refunds in 95 per cent of cases.

“The lazy method is to claim the 80c per hour,” he says.

HLB Mann Judd Sydney tax partner Peter Bembrick says working from home has created fresh tax opportunities.

“Many people will be able to claim for a number of work-related expenses they wouldn’t otherwise have had to consider, such as home internet usage and items required for a home office,” he says.

3. DONATE FOR DEDUCTIONS

Donations to most legitimate charities are tax deductible, and they feel good too.

“Often people make their donations right before financial year end,” Bembrick says.

“All the charities send out letters in June because they know that’s what people are doing.”

4. SUPERANNUATION STRATEGIES

People can pump up to $25,000 into their super this year – including employer contributions and salary sacrifice – and claim a tax deduction for it.

But it must be sorted well before the end of June to ensure the fund gets the money before July 1.

Spouse contributions made for low-income partner can also trigger a handy tax offset.

Getting in early is a key strategy for Susie Taaffe, 40, who runs online underwear retailer Missy Massy.

She meets with her accountant a month before June 30 to cover both business and personal tax strategies.

“I work out what my super total is going to be, and whether it would be smart to make extra super contributions,” Taaffe says.

Mt Taxman founder Adrian Raftery says prepaying expenses is helpful. Picture: Simon Fox

5. CAR CLAIMS

Raftery recommends using a logbook for 12 weeks to map your work-related car expenses.

“If you use your car for work purposes it can be your biggest tax deduction for sure,” he says.

Many people only claim the cents per kilometre method of 72c for up to 5000km travelled, but often cars can deliver bigger deductions once petrol, maintenance, insurance and other costs are combined.

LAST YEAR’S TAX REFUND SIZES

Under $1000: 27 per cent of taxpayers

Between $1000 and $4999: 32 per cent

Between $5000 and $9999: 7 per cent

Between $10,000 and $50,000: 3 per cent

Source: H & R Block