How to ditch the tax time blues and maximise your return

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I have fond memories of my parents filing their tax returns in the mid-2000s, (yes, I know that’s a strange thing for a child to remember fondly but here we are) with pages strewn across the table and them painstakingly plugging numbers into e-tax, which even back then looked like it was about 10 years past its use-by.

Thankfully, the tax office killed off e-tax in about 2016, replacing it with a far more palatable system. However, tax time can still be a painful process, and many people put off filing their tax return for months – sometimes even years.

Tax time doesn’t have to be painful if you follow a few simple tips.Credit: Aresna Villanueva

I’m firmly in the “file it ASAP” camp because there’s nothing better than getting those sweet, sweet tax dollars. But for those who might baulk at the whole process, here are some tips to help you make the most of it.

Each year, the ATO hands out about $30 billion to $40 billion in tax returns. About two-thirds of us choose to handball our return to a tax agent, with the remaining third of us opting to slog it out in MyTax.

From that ~$30 billion, on average, Australians receive about $2800 in their tax returns each year, which some see as forced savings and others as surprise spending. This year, I’ve got a foot in each camp, as a chunk of my tax return will almost certainly be helping fund a holiday later this year, but I do try and save as much of my return as possible.

What’s the problem?

However, this year’s tax time will likely feel less rewarding, as the ATO is set to hand back significantly less than we’ve become accustomed to recently. This is largely due to the axing of the low and middle-income tax offset (LMITO, colloquially known as the “lamington”) which was introduced in the 2018/19 budget by the Morrison government and extended through the pandemic. For those earning between $48,000 and $90,000, this means your tax return this year will be about $1500 worse off.

To make matters worse, for those of us who work from home, the tax office has ended its (arguably very generous) shortcut method that allowed you to claim 80c per hour working from home and replaced it with a much more onerous 67c per hour method, which requires you to keep full records. All in all, this means most of us will be getting less back from the tax man this year.

What you can do about it

Thankfully, there are a number of things you can do to maximise your tax return this year:

• Before you start: Get everything you need to support your deductions. Receipts, invoices, bank statements, credit card statements - without this sort of supporting documentation you’ll be unable to claim your deductions. If you’re unsure about what you can and can’t claim, check the ATO’s website (including its industry-specific guides) or speak with a tax agent.
• Claim everything you’re entitled to: While this may seem like an obvious statement, Mark Chapman, director of tax communications at H&R Block says because refunds are likely to be a bit smaller this year, it’s important everyone claims every deduction they can. “But don’t embellish your claim, don’t overclaim, or claim things you’re not entitled to,” he says.
• Get on top of the working-from-home changes: As mentioned, the ATO has changed how working-from-home deductions are calculated, so it’s important you understand the changes if you’re going to make a claim, says Chapman. Given the tax office announced the change in February, the ATO will accept a four-week diary that shows the hours worked before then. However, from March 1 onwards, taxpayers will need to record the total number of hours they work from home, and you will need to have an invoice or receipt for the expense you claim. “Some taxpayers won’t know these rules have changed, which will be a nasty surprise for when they go to claim, and some will find they haven’t kept the necessary records, so they won’t be able to claim,” Chapman says. The ATO has more details on its revised fixed rate method on its website.
• Check for government initiatives: Taking advantage of various offsets offered by state or federal governments could help to minimise your tax liability, says Peter Lock, CEO at Heritage Bank and People’s Choice. “Check out any government initiatives that offer tax benefits, such as tax offsets that might be available to you or the instant asset write-off that has been available in the past for small businesses,” Lock says.
• Avoid simple mistakes: Tax returns can be held up for weeks if the ATO is unable to match your return to their records, Chapman says, so make sure you don’t make any spelling mistakes or enter the wrong bank account details. If you’ve changed your name or address, make sure you update your records with the tax office before you file your return.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.