Navigating your tax return for 2021

Do you want to get more from your tax return this financial year, but you’re not sure where to start? It could be as simple as knowing which tax deductions and offsets you’re eligible for.

With the end of financial year fast approaching, you might be hoping to claw back some of your hard earned cash when you lodge your tax return this year.

The Australian Taxation Office refunds billions of dollars to individual taxpayers each year, so it’s worth taking the time to maximise your return.

How do I get a tax refund?

A tax refund is a reimbursement of any excess tax you’ve paid to the government during the financial year. The ATO will work out whether you’re eligible for a tax refund based on the details you supply in your annual tax return.

Generally, a refund comes about when you claim deductions for expenses related to earning your income. You may also qualify for certain tax offsets, which directly reduce the amount of tax payable on your taxable income.

You’ll need to keep written records to prove your claim, so stay on top of your paperwork throughout the year. Here are some of the more common deductions and offsets you might be eligible for.

Working from home

If you’re working from home, you’re eligible to claim deductions for certain work-related expenses. The easiest way to work out your deduction is using the temporary ‘shortcut method’ introduced last year. It allows you to claim a deduction of 80 cents for each hour you work from home. You’ll need to keep a record of the hours you worked, in the form of a roster, diary, timesheet or similar to prove your claim.

Alternatively, you can still use the Fixed Rate Method or Actual Cost Method which were in place before COVID-19.

Read more: What you can claim when working from home

Personal protective equipment (PPE)

During the COVID-19 pandemic, if you’re working in an industry where you come into contact with the public, you might be able to claim a deduction for the cost of personal protective equipment (PPE).

Things you can claim include purchasing a face mask to wear at work, and other PPE such as gloves and hand sanitiser, but only if you meet certain requirements:

• your job requires you to be at your place of work
• a face mask isn’t provided by your employer
• you’re in close contact with other people, such as clients, customers and colleagues, or
• you’re cleaning a premises.

Check the ATO website for more information.

Other work-related expenses

Even if you don’t work from home, you may still be eligible to claim a deduction for certain work-related expenses. Some of the most common deductions include:

• Vehicle and travel expenses
• Self-education
• Tools and equipment
• Clothing, laundry and dry-cleaning
• Other work related deductions.

Remember, the expense must relate directly to earning your income and you can’t claim a deduction if you were already reimbursed for the expense by your employer.

What if my income comes from investments?  

If some or all of your income is from investments, dividends or interest, you can claim a deduction for certain expenses you incur while earning that income. This includes things like:

• Account keeping fees
• Interest charged on money you borrow to purchase the investment (e.g. shares or property).

Because investment deductions can be complicated, always seek help from a tax professional to help maximise your return.

Superannuation tax offsets

No matter your income, there’s a few handy ways you can boost both your super balance and your tax refund.

Super spouse tax offset

If your spouse or partner earns less than $37,000 this financial year, and you contribute $3000 to their superannuation account, you could be eligible for a $540 tax offset. If your spouse earns up to $40,000, you may still be eligible for a part-offset amount.

Tax deduction for personal super contributions

For some people, making top-up concessional super contributions is an effective way to reduce your taxable income. It works like this: You’re allowed to claim a tax deduction for the amount of any personal, ‘after-tax’ super contributions you make in a financial year (e.g. from your take home pay), up to your concessional contribution limit. The contribution is then taxed at 15 per cent in your super fund, instead of at your marginal tax rate. So depending on your income, this could mean a tax saving.

There are eligibility requirements and you need to let your super fund know in advance using a Notice of intent to claim form. Speak to a financial advisor to find out if this strategy is right for you.

Government super co-contribution for low income earners

Not a tax refund as such, but this is a great way for low-income earners to top-up their super balance at tax time. If you earn less than $39,837 and you make an after-tax contribution of $1000 to your super, the federal government will provide a $500 co-contribution. If you earn up to $54,837, you’re still eligible for a part contribution, provided you meet all the eligibility criteria.

Last, but not least, it’s worth mentioning that costs associated with preparing your tax return are tax deductible – so don’t hesitate to consult a professional tax adviser.