It’s time to get your tax affairs in order as 30 June is fast approaching. So whether you keep your records and supporting documentation in a shoebox or on a computer, it’s time to start preparing for your tax return.
Here’s a handy checklist we’ve asked our tax expert to put together for you in order to maximise your deductions for the year.
1. Working from home? Make a claim!
If you work from home - either occasionally or all the time - and run a home office, you are entitled to deductions for costs arising from working at home.
The expenses that you can claim include:
· Heating, cooling and lighting
· Cleaning costs
· Decline in value (depreciation) of home office furniture and fittings, office equipment and computers (for items over $300)
· Computer consumables, stationery, telephone and internet costs
· Items of capital equipment (such as furniture, computers and associated hardware and software) which cost less than $300 can be written off in full immediately
Methods of claiming:
· Diary method/actual running expenses
You will need to keep a diary to work out how much of your running expenses relate to doing work in your home office. You can only claim the work-related proportion. The diary needs to detail the time you spend in the home office compared with other users of the home office. Keep diary records for a representative four-week period.
· Tax Office rate per hour method
You can use a fixed rate of 45 cents per hour for home office expenses for heating, cooling, lighting and the decline in value of furniture instead of keeping details of actual costs. You just need to keep a record of the number of hours you use the home office and multiply that by 45 cents per hour. Under this method you can also include the decline in value of office equipment (i.e. computers, faxes, etc.) but not furniture.
The following costs are not deductible as part of home office expenses: mortgage or interest costs, rates and taxes or depreciation on the home.
2. Did you use your car for work? Don’t forget the tax deduction!
You can claim motor vehicle expenses related to your work. There are two methods you can use to do this:
· The cents per kilometre method. You claim a flat rate of 66c for every kilometre travelled for work purposes. You can only use this method if you travelled 5000 business kilometres per vehicle or less. This covers all expenses, so no other claim is possible.
· Alternatively, you can use the log-book method. You must use this method if you travelled more than 5,000 business kilometres per vehicle. This allows you to claim each individual expense (such as fuel, insurance, servicing, depreciation). However, you must keep detailed substantiation (receipts, invoices, etc) and keep a logbook.
Now is the time to check that your log-book is up to date and that you have all the receipts, invoices and records of journeys which you will need to calculate and substantiate your claim
3. Completed a course for work? You might be able to claim the cost as a tax deduction!
If you undertook a course of training or study during the year which was related to the job you do and which you paid for yourself, you can claim the costs related to that course. That doesn’t just cover the cost of the course, it also covers all the incidental costs related to your study, such as airfares, accommodation and meals (if you travelled interstate), motor vehicle expenses (if you drove to the place where the course was held) and home office costs, if you studied at home. If you purchased a computer, laptop or tablet for use in your studies, you can claim the relevant portion of the cost either straight away (if the cost was less than $300) or over several years (if the cost was more than $300).
4. Gather written evidence. You’ll need it to claim deductions!
Gather together all your paperwork into a well-organised file. Whether you are self-preparing or lodging through an accountant, it makes the process easier and quicker if you have all your documentation on hand, complete and in the right order! Sadly, if you don’t have supporting documentation for each deduction (if they total more than $300), you can’t claim the deduction so it pays to hunt around for missing documentation.
5. Offset capital gains against capital losses!
If you’ve disposed of shares or any other form of investment and you know you’ve made a capital gain, take a look at your investment portfolio and consider disposing any assets, which you own that are sitting at a loss. The resulting capital losses can be offset against the capital gain.
Be careful though! If you sell shares sitting at a loss and then buy them back, the Australian Tax Office (ATO) takes a hard line against so-called “wash sales”. This refers to the sale of an asset before the year-end and the purchase of a substantially identical asset immediately after the year-end, such that the owner has a continuing economic exposure to the asset. The ATO has issued a tax ruling, which states that they can apply the anti-avoidance provisions to cancel tax benefits and apply penalties.
And finally…seek expert help
Speak to your tax agent. They can identify exactly what you need to do to get into shape for the 2016 tax season and maximise your deductions.
Mark Chapman is H&R Block’s director of tax communications.