Tax deductions 2021: your last-minute guide for a bigger refund

Want a bigger tax refund this year? Try these tips from financial experts, but you must act before June 30.

Tax time starts in just over a week, but the real action comes in the next nine days for Australians wanting bigger refunds.

Workers, investors and small business owners have many options to make the most of tax deductions before June 30, money specialists say.

Taxpayers are very sure of their ability to get the best refund, with 69 per cent rating their knowledge of tax deductions as good, very good or excellent, according to new research by accounting software group MYOB.

Only 8 per cent rate their tax deduction knowledge as “poor”.

And 43 per cent of people use a tax agent or accountant, and a majority expect a lower refund this year despite the potential for home office workers to claim more.

FEEL-GOOD DEDUCTIONS

Financial commentator and Sky News business editor Ross Greenwood says whether you’re an employee working from home, sole trader or other small business owner, now is the time to spend.

“Look around your office for anything that needs to be replaced – if you are thinking about it, it’s worth doing before June 30,” he says.

“Donations are a good thing to do – there are so many good, decent charities out there and everyone can be that little more philanthropic.”

Sky News business editor Ross Greenwood says spending now might be wise.

Greenwood says tax deductions for extra contributions into superannuation are a “significant incentive”.

People can put up to $25,000 a year into super a claim a deduction, but this cap also includes employers’ compulsory contributions.

HOME OFFICES HELP

People who worked at home during 2020-21 should understand the record-keeping requirements and talk to their tax agent before the end of financial year, says MYOB tax specialist Jacqueline Lim.

“Working from home expenses are likely to be higher for this financial year due to Covid restrictions,” Lim says.

The Australian Taxation Office has three options for working from home deductions, and the simplest 80c-an-hour “shortcut” method does not usually deliver the biggest deductions.

Phones, internet, printer ink, depreciation of electronic equipment, stationery and home energy are among deductions that can be claimed by those who keep records.

Lim says other potential deductions include tax-deductible donations, prepaying property and other investment expenses, extra super contributions and instant asset write-offs for small business owners.

SMART INVESTING

Investment timing is important right now, Greenwood says. “This has been a year where people have had a lot of gains, and the last week of the financial year is the time you often see people try and square off the ledger,” he says.

Investments that lost money can be sold to offset capital gains elsewhere. And keep consider the federal government’s plans to widen the 30 per cent marginal tax rate to $200,000 from July 2024. Waiting until then to sell a large asset for a big profit may deliver huge tax savings, Greenwood says.

Employment Hero head of financial wellness Ray Jaramis says Covid’s working from home trend created “a whole new world of deductions” for many people, and workers should also understand what they can claim based on their industry.

The ATO has 39 occupation and industry specific guides to help workers understand their deductions, so check if your job is on there.

“What you get to claim back at tax time is driven by what you do for work,” Jaramis says.

“For example, hairdressers and beauty professionals will have a different schedule of deductions they can make compared to that of a carpenter.”

MYOB tax specialist Jacqueline Lim says working from home expenses should be higher.

DO IT NOW

• Search the ato.gov.au website for occupation-specific tax guides.

• You may be able to prepay for work-related courses, conferences or events.

• If putting extra money into super, do it this week so your fund receives the money before June 30.

• Investors who delay selling an asset until July 1 can push the capital gains tax bill back by a year.

Join Ross Greenwood during Afternoon Agenda on Sky News at 4pm to find out how to get the most out of the end of financial year.