It’s the time of year where everyone starts combing through bank statements and receipts looking for ways to reduce their tax bill.
While everyone loves a refund at tax time, it’s important to make sure the expenses you claim are legitimate.
It’s also important to make sure you’re not short-changing yourself by missing deductions you are entitled to claim.
Here are four mistakes to avoid when filing your taxes this year from John Jeffreys, a taxation specialist with 40 years experience.
Mistake #1: Home office expenses
Many Australians are still incurring expenses while working from home.
The ATO does allow deductions for home office expenses, but the rules can be tricky, especially if you’re filing your taxes without the help of a tax agent.
The ATO introduced a “shortcut” method for home office expenses during the pandemic, which you can still use this financial year.
It allows you to claim a deduction of 80 cents for each hour worked. All you’ll need is a record of the hours you’ve worked from home.
However, the ATO also allows you to claim home office expenses using the “fixed rate method” or the “actual cost” method.
In many cases, you may get a better deduction using one of these methods, particularly if you’ve bought equipment for your home office.
“If people have kept records and so forth, and they are working from home, it is very often the case that they will get a better tax deduction by not using the shortcut method,” Mr Jeffreys says.
“It does depend on the numbers, but that is a generally held view in the tax profession.”
However, to make a claim using one of these other methods, you’ll need to have a dedicated workspace in your home.
For example, if you’re working from your dining room table, you won’t be able to use the “fixed rate” or “actual cost method” because your dining room isn’t exclusively used for work.
In that situation, you can still make a claim using the 80 cents shortcut method, which is available even if you don’t have a dedicated work area in your home.
However, it appears the shortcut method won’t be available next financial year, which could make claims in future more complicated.
Mistake #2: Claiming expenses without adequate records
If you’re making a claim for expenses related to your work, you need to keep good records of the expense incurred.
The ATO says records should contain:
- the name of the supplier;
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