Maximize your tax deduction – Individuals

As 30 June is fast approaching, this is the best time to review your situation to see if you are able to maximize your income tax deduction to get back more tax refund (or reduce your tax liability) when lodging your 2018 tax return!

This article will focus on what individuals can do to legally maximize their tax deduction to minimize income tax liability. We will look into some work-related expenses, donations, tax agent fees, personal super contributions and income protection insurance in this article.

There will be a separate article for business owners so keep an eye on our website!

Note that we are only providing general advice on what items you may be able to claim as your tax deduction, the actual tax deductibility for certain items depend on your personal circumstances. If you would like assistance for your situation please contact us.

Work related expenses

We touch on the common work-related expenses claims – motor vehicle expenses, laundry expenses, home office expenses as these are the main areas where we see clients come back with the most questions.

Motor vehicle expenses

You may be able to claim travel expenses if you are required to travel between workplaces using your own vehicle. You can claim motor vehicle expenses under the log book method or the cents per kilometre method. If claiming under the log book method you need to have a valid log book, as well as keep copies of all the vehicle related receipts. If claiming by the cents per kilometre method you can claim a maximum 5,000km per year per vehicle. Note that you will need to be able to justify your kilometre claim including where you travelled and why you needed to go there if it is questioned by the ATO. More info from the ATO can be found here.

Laundry expenses

If your occupation requires you to wear specific clothing, protective clothing or your employer requires you to wear uniform with company logo on it, then you can claim the cost and laundry expenses on those clothes. The ATO accepts a $1 per load laundry claim if you do your own laundry. The maximum claim for laundry expenses without written evidence is $150 (given that your total claim for work-related expenses is not more than $300 including the laundry amount), otherwise written evidence may be required.

More info here: https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/clothing,-laundry-and-dry-cleaning-expenses/

Home Office expenses

If you are required to use your home computer, phone or tablet to perform work from time to time at home, you can claim the running costs of your home office. This could include home office equipment (cost or the depreciation of the equipment), cost of heating, cooling and lighting, cost of repairs to your home office furniture and fittings and cleaning expenses. To claim home office expense, you need to ensure you have a dedicated area in the house as a home office in order to justify your claims.

When making these claims, apart from the receipts of the purchase of the equipment and bills etc, you will also need to keep a diary for a representative 4 week period detailing how much you use your home equipment, home office and phone for work purposes.

The ATO has the following home office expenses calculator that helps you work out the amount you can claim as a deduction (the calculator assumes that you are eligible for the deduction).

The ATO has laid out the general rules for claiming a work-related deduction:

• you must have spent the money yourself and weren’t reimbursed
• it must be directly related to earning your income
• you must have a record to prove it.

Please ensure you follow the rules when making a claim as not doing so may mean audit, penalties and interest charges!

Donations

You can make a donation to a charitable organisation that is a deductible gift recipient (DGR) and claim the amount donated (as long as over $2) as a tax deduction in your tax return.

To check if an organisation is a deductible gift recipient or not, you can go to the ABN LookUp website and type in the organisation’s ABN. Usually when you make a donation, the organisation will send you a receipt which will normally have their ABN shown on it. Once you type in the ABN of the organisation on the ABN LookUp page, you will find details of the organisation including a heading “deductible gift recipient status” at the bottom of the page.

In recent years we are aware many clients have made a donation on crowdfunding websites such as GoFundMe. We would like to bring to your attention that the donations made to these websites may not be tax deductible as it depends on the deductible gift recipient status of the fundraiser to determine whether a donation is tax deductible or not.

Tax Agent Fees

Yes – the fees you pay us to prepare your previous year tax return are tax deductible as long as you make payment by 30 June! Please ensure your fees are up to date, or pay by 30 June to have the fees included in your tax return as a tax deduction!

Personal Superannuation Contributions

From 1 July 2017 onwards all taxpayers under 65 can to contribute up to $25,000 into their super fund and claim a deduction for the amount they have contributed. Taxpayers between 65 and 74 are able to contribute as long as they satisfy the work test.

Note the maximum contribution amounts of $25,000 includes your employer’s super contribution so please check before making contribution to ensure you are not over-contributing as this means extra tax!

To ensure the tax deductibility of your personal superannuation contributions, you need to make sure the money is received in your super fund account by 30 June. Generally you would have to allow 5-7 business days for the funds to reach your account so don’t leave this till the last minute!

There are also paperwork to be filled in and sent to your super fund, and deadlines to meet, to make the contributions tax deductible – check with your super fund for details.

Please see our previous article for further details.

Income Protection Insurance

The premiums you paid to your insurance to ensure you have money to cover your everyday expenses when you are unable to work due to injury is tax deductible. For those who have paid income protection insurance premium this year, you will receive a statement from your insurance company around July detailing how much premium you have paid that may be tax deductible. Please bring in this statement to us so we can include it in your tax return.

Note this is different to life insurance premiums which are not tax deductible.

Other matters

If your relationship status has changed during 2018 financial year please let us know as it may affect your tax liability calculations.

Feel free to email  or call us if you require assistance with your tax return, or if you require specific advise on how to maximize your tax deduction.