Tax refund July 1: How to claim big tax deduction

With just two days left in the financial year, a tax expert reveals the best strategy to maximise the amount of money you can claim on your return.

Australians are being urged to not be seduced into accepting the increased flat rate on offer this tax season.

The Australian Taxation Office has simplified the claims process for the masses forced to work from home during the coronavirus lockdown by boosting the standard hourly rate this financial year from 52 cents per working hour to 80 cents.

But National Tax and Accountants’ Association spokesperson Andrew Gardiner says this will result in hundreds of dollars being trimmed from what the taxpayer is owed.

“The concession covers off heating, cooling, electricity and then payments to do with your computer, printer, cartridges, and paper,” the senior tax manager told news.com.au.

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“People need to be very careful with that concession because it is only 80 cents per hour and when you factor that in over a standard 40-hour week, we’re only talking $32.

“And if you factor that in over the period of COVID-19, it’s not a massive claim. People need to be careful they’re not simplifying their affairs by adopting this approach at the detriment of a much bigger claim.”

WFH has been the abbreviation of 2020.

Opting for the flat rate means the taxpayer will forgo their right to claim the new desk, chair or computer they splashed cash on when the pandemic forced the majority of the workforce to abandon their office.

“Once you go down the path of adopting the ATO’s 80 cents per hour claim, you then forfeit your right to separately claim for home office expenses like electricity which extends to the internet and home phone.

“It also then removes the right to claim depreciation on your desk, computer and consumables like print cartridges and paper.”

RECORD KEEPING

Coco Hou, CPA and managing director of Platinum Accounting and Platinum Professional Training said people wanting to claim deductions for expenses associated with services they may be using while working from home would need to undertake careful record keeping.

"Keeping a timesheet is essential for claiming utility deductions," she said.

This enables the person preparing the tax return to understand what portion of the individual's home running costs can be attributed to their work from home time. Utilities may include electricity, gas, phone, internet, and water.

"Other expenses may include rates, insurances."

DOCUMENTATION

"Many people may also have to go out and buy technology, office equipment, furniture, consumables such as paper, and other items to set up work at home. These expenses may also be claimed," Ms Hou said.

She encouraged people to be diligent with record-keeping and to keep invoices and receipts for tax purposes. 

"Invoices and receipts are important for work-related purchases.  The more claims you make, the more evidence you need."

USE APPS

"I always encourage my clients to download and use simple apps that help you to capture and manage expenses," Ms Hou said.

"In the old days, people used to keep these in shoe boxes. Thankfully apps make record keeping a lot easier. You can simply take a photo of the documents and upload them to the cloud.

"Most good apps will integrate with cloud-based accounting solutions such as Xero. This means your accountant can access the information easily when preparing your tax return.   Ideally, ask your accountant which apps they use and download one of these."

TRAVEL

While most people are confined to their homes, travel can be necessary for some.

"If you need to leave the home to travel somewhere to purchase items essential to your work, you may incur costs doing this," Ms Hou said.

"If you travel by car or public transport costs are incurred.   You may need to put petrol in your car.  Keep a log book for your vehicle and keep track of the kilometres travelled."

EASILY OVERLOOKED ITEMS

Don't forget to include expenses associated with car insurance or subscriptions for services that you may need to access in the course of your work such as media accesses.

PURCHASING ASSETS

For workers purchasing items to set up work spaces at home such as desks, chairs and other items, it is important for wage and salary earners to know that the threshold for instant assets write off is $300.

However, for business owners, including sole traders, the threshold is $150,000, up from $30,000. So for those with available funds, it is a good time to shop if you have the cash.

The ATO is assisting people where it can.  

"Higher running costs claims are now allowed," Ms Hou said.

"The ATO has increased this from 52 cents per hour to 80 cents per hour for running expenses while working from home.

"The ATO has also loosened requirements around work spaces. No dedicated working area is required. Each family member can make a claim through their own return, even though they might be sharing the working space.

"This was not allowed in the past. It is now much easier to claim.

"You only need to keep a timesheet, no other substantiation is required. Importantly the ATO wants to avoid 'double dipping'. Expenses must be out of pocket expenses. If the expenses are reimbursed by your employer, then the claim is not allowed."

CONFUSION OVER WHAT TO CLAIM

The unique working environment caused by the global pandemic has created confusion over what can and can’t be claimed.

“There has been suggestions that people can claim additional toilet paper which they can’t; or they can claim their food because now they’re working from home, which is not claimable as well," Ms Hou said.

“The expenses that are available to people who are working from home are isolated to the cost directly related to their employment while they’re working from home.”

SO WHAT DO I NEED?

The ATO will need to see the number of hours you worked from home and a diary of a four-week period showing the pattern of expenses, Mr Gardiner said.

Receipts will then need to be provided for each item you intend to claim.

“The taxpayers who are prepared to take the time to embrace the record keeping, the four week diary and the illustration of their use will find themselves hundreds and hundreds and hundreds of dollars better off,” he said.