Getting your tax return over with doesn't have to be difficult. It's important to think ahead and keep all the documentation you need, so that next year's return is easy. To help you along the way, we've pulled together this list of five tax return tips to help you get prepared for next year.
1. Work out if you need to do a tax return
For some people, it's pretty simple to work out if you need to lodge a tax return, but everyone's situation is different. There are criteria and exemptions to consider. If you're curious, the ATO has a complete guide to work out if you need to lodge a tax return in Australia. If you’re a business owner, we have a checklist for small business tax returns to check out too.
2. Get last year's tax return out of the way
If you haven't done your tax return yet and you’re reading this before 31 October 2020...you're in luck. There’s still time to lodge your tax return for 2019/20 without applying to lodge it later, or worse, incurring a penalty for not lodging your return on time.
If you're unsure where to begin with your tax return, there are lots of online resources available to get you started on your own. Otherwise, a registered tax agent (e.g. a Certified Public Accountant or ‘CPA’) can help you get started. Only a registered tax practitioner can charge you a fee for preparing your tax return.
3. Learn about what you can and can’t deduct or claim
There are many rules about making deductions on work-related expenses, but the basic ones straight from the ATO are:
• You must have spent the money yourself without being reimbursed;
• The expense must be directly related to earning your income; and
• You must have a record (like a receipt) to prove the expense.
There are pretty strict limits on what the ATO will and won't let you claim on your tax return, as well as what percentage of a purchase can be claimed or depreciated.
For most people, deductions are usually only made on work-related expenses, such as: tools and equipment, uniforms, education, and some travel expenses. There are also more complex deductions available if you earn income on investments – like shares or property.
It's really important to check the ATO's guidelines on this, so please refer to the ATO directly for further information.
While a tax professional will have a thorough idea of all the expenses you can claim, there are a few that you might not be aware of.
We've put together a list of expenses you can claim which you may not know about.
4. Have your income and expense documents ready
If you're the kind of person who likes to stay organised, sorting your documents chronologically in a large accordion folder with colour-coded tabs might come naturally. For the rest of us, we admire the dedication, but it just isn't happening!
Here are a few simple alternatives:
• Save digital copies/photos of your documents somewhere secure with a strong password;
• Print your most important documents and store them in a safe or locker; or
• Use an app, like ATO myDeductions, to help you keep work-related receipts in one place.
5. Keep your personal information updated with the ATO
Once your accounts are linked, you can easily update your home address, phone number and other personal information. You can also access information about your superannuation, any debts you might have (like HECS), find PAYG summaries and group certificates, and access Single Touch Payroll information if your employer supports it.