Easy way to get $280 back in tax now

As soon as the stage 3 tax cuts kick in it will change one thing – meaning now is the time to claim $280 in tax back.

What’s the one thing that high income earners, low income earners, Millennials and Boomers all have in common? They all pay the same rates of tax – but the smart ones use those tax rates to their advantage more than the others.

Stage three tax cuts are coming on July 1, and most of the media has focused on how much better off you’ll be, the winners and losers, and whether Albo can ever be trusted again …

But nobody is talking about the short window of opportunity to get more back in your tax return this year.

Lower tax rates next year mean you’ll pay less tax – but what most people haven’t fully figured out yet is that it means your tax deductions are also going to be worth less as soon as these tax cuts kick in – which means deductions you get between now and June 30 are going to be worth more than they ever will be again.

Prime Minister Anthony Albanese debates Treasury Laws Amendment (Cost of Living Tax Cuts) Bill 2024 at Parliament House in Canberra. Picture: NCA NewsWire / Martin Ollman

How much can you save?

For example, if your income is $190,000 in this current financial year, every dollar of deductions you get this year will be refunded at 47 cents in the dollar, but next year those same deductions will be refunded at 37 per cent, meaning 10 per cent less bang for your buck.

And it’s not just high income earners. Deductions at an income of $20,000 will be refunded at 17 per cent this year versus 16 per cent from July 1, deductions at a $45k income will be refunded at 32.5 per cent this year compared to 30 per cent next, and at an income of $130,000 you’ll receive benefit this year of 37 per cent compared to only 30 per cent next.

The average tax refund in Australia is $2800, so if you were able to get an extra 10 per cent back you’re looking at $280 of free money – which could be even higher depending on your level of deductions. If you want to use the rules to your maximum advantage you’ve got a small, fast-closing window to make it happen.

So what is deductible?

The two largest work-related deductions are motor vehicle expenses, which can be claimed if you’re using your vehicle for work purposes, and home office expenses, which are on the rise with the working from home trend in full gear.

Claiming home office expenses is on the rise with the WFH trend in full gear. Picture: iStock

For most people, these two alone can result in thousands of dollars of tax deductions, and thousands of dollars being refunded at tax time.

Another area many people under claim is around self-education expenses, where basically any education (short courses or formal study), reading or learning you do that can help you increase your income is generally considered deductible by the ATO.

Outside of work related deductions, you can also claim expenses relating to your investing and tax strategy. Interest costs on investment debt, capital losses on investments, the cost of tax advice, or advice around generating ongoing investment income, depreciation, and negative gearing expenses can all be claimed and help maximise your tax refund.

If you want to maximise your tax return, it’s crucial you understand the rules. Most people miss out on claiming deductions (and getting tax back) simply because they don’t know what they can claim and what they can’t. You can check the ATO’s website which has a heap of helpful guides around what you can claim to use the rules to your full advantage.

People under claim self-education expenses; any learning or reading that can help you increase your income is generally considered deductible. Picture: iStock

Prepayments are your friend

Having your tax deductible expenses fall in this current financial year instead of next has two benefits. Firstly, as mentioned above with the changing tax rates your deductions will be worth more to you this year than next – but it also means that you get any tax back a full year sooner.

This means if you have tax deductible expenses that will fall into the new financial year, you’ll benefit from bringing forward these expenses into the current financial year. You could look to prepay interest costs, insurance premiums, the cost of advice, or bring forward your home office or vehicle spending, which would increase your deductions in this current financial year and mean you get the money back sooner.

Note that this only works if the expenses are going to happen anyway, i.e. it doesn’t make financial sense just to spend money to get a tax deduction. But, if you’re going to spend this money anyway you’ll benefit from bringing tax deductible spending forward.

You have to keep good records

Probably the single biggest area that costs people the most money when it comes to tax is not keeping good records. You must be able to back up your claims with the ATO, and further to that, if you’re not on top of tracking your tax deductible expenses it’s easy to miss things when you submit your tax return.

The single biggest area that costs people the most money when it comes to tax is not keeping good records. Picture: iStock

Whether you want to use the shoebox method, a tax tracking app, your own spreadsheet, or take some other approach – the key is that you have a system where you track your tax deductible expenses and have these easily accessible when you need them.

Most people miss out on claiming tax deductions simply because they didn’t keep good records, so don’t fall into this trap. Tracking your tax deductions well will also make it easier for you to do your tax planning before EOFY, and help you get your tax return submitted promptly to get the money back in your bank account faster.

The wrap

Most people don’t think about their tax planning and how to get the most out of their tax return until after the financial year has finished – but the reality is that once the financial year ends, your ability to actually change anything is seriously limited.

Being on the front foot with your tax planning is something that’s valuable and important every year, but this year in particular with the changing tax rates, it’s even more valuable. The window of opportunity here is closing fast, and once closed it will be gone for good – so don’t miss out.

Ben Nash is a finance expert commentator, financial adviser and founder of Pivot Wealth. Ben is the creator of the Smart Money Accelerator program that helps people build a second income investing faster.

Ben is also the Author of the brand new book, Replace your salary by Investing and the host of the Mo Money podcast, and runs regular free online money education events.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.