Here is the ultimate guide to successfully prepare your personal tax return. Before meeting with you to prepare your tax submission, you need to gather certain information that applies to your circumstances for the year. There’s no denying that the ATO’s pre-filling service takes care of a lot of the traditional paperwork, however most of this information is not available until late-July. If you’re happy to wait until then, the ATO’s systems will usually be able to provide information shared by employers, banks, government agencies, health funds and other third parties.
We will then be able to check this information with you and discuss any deductions you may be able to claim. However, to be thorough, before coming in for your appointment, below are the sorts of information you should look at bringing with you to assist us in completing your tax return.
- PAYG Payment summaries (now called Income Statements): These outline the income you have received from your employer, super fund or government payments such as from Centrelink or the Department of Veterans Affairs during the year.
- Bank statements: Details of interest you have earned during the year. You may also be able to access interest details using your online banking account.
- Shares, unit trusts or managed fund statements: Information on dividends or distributions you have received. (dividends that you’ve elected to reinvest must be declared as income). Managed fund tax statements are normally sent by the fund manager in August.
- Buy and sell investment statements: Needed to calculate capital gains and losses when you dispose of an investment. You should be able to access this information from your online broking account or investment advisor.
- Rental property records: If you use an agent to manage the property they should provide you with an annual tax statement that details income and expenses. Other details to provide will include council rates, water rates, insurance, interest expenses and repairs.
- Private health insurance policy statement: Information needed to complete the private health insurance section of your tax return (could be pre-filled this year).
- Foreign Income: Details of foreign pensions or other foreign income.
- Income that must be declared.
Income you must declare
Here is a list of the common types of income that must be declared on your tax return. Note that this remains the case even if your amount of income has been affected by Covid-19.
- Employment income (including JobKeeper Payments)
- Superannuation income streams, lump sums, annuities and government payments
- Investment income (interest, dividends, rent and capital gains)
- Business, partnership and trust income
- Foreign income
- Income from the sharing economy (Uber and Airbnb)
- Income from Crowdfunding (for example donations received for a venture in which you intend to make a profit)
- Business income
- Other income including compensation and insurance payments, discounted shares under employee share schemes, some prizes and awards.
- JobSeeker or other relevant welfare payments.
Check with us if you are unsure about any of these payments.
Deductions you may be able to claim
Here is a list of expenses you may be eligible to claim as deductions. Remember that this is not an exhaustive list and individual circumstances may come into play.
To claim a deduction for work-related expenses:
- you must have spent the money yourself and not been reimbursed
- it must be directly related to earning your assessable income
- you should have a record to substantiate your claim.
When your expenses meet these criteria, here’s a list of the things you may be able to claim:
- Vehicle and travel expenses: This does not normally include travel between home and work (unless transporting bulky tools or equipment), but if you use your car for work in different locations, then you may be able to claim a deduction.
- Clothing, laundry and dry-cleaning expenses: For uniform expenses, the clothing must contain a logo or be occupation specific, such as chef’s pants. You may also be able to claim protective workwear such as steel capped boots.
- Gifts and donations: Only contributions made to organisations that are endorsed by the ATO as ‘deductible gift recipients’ (DGRs) are acceptable.
- Home office expenses: Costs may include computer, phone, electronic devices and internet but only the proportion of expenses that relate to work can be claimed. There is an alternative “80 cents per hour” shortcut method that can be used for claiming expenses if you worked from home during the Covid-19 lockdown (only from 1 March 2020. In this case you do not claim internet, stationery, depreciation etc costs).
- Interest, dividend and other investment income deductions: Examples include interest, account fees, investing magazines and subscriptions, internet access, depreciation on your computer.
- Self-education expenses: Providing the study relates to your current job, you may be able to claim course fees, books, stationary, internet, home office expenses, student union fees, professional journals and some travel.
- Tools and equipment: If you purchase tools or equipment to help you earn your income, you may be able to claim for some or all of the cost. The type of deduction you claim depends on the cost of the asset. For items that don’t form part of a set and cost $300 or less, or form part of a set that together cost $300 or less, you can claim an immediate deduction for their cost. For items that cost more than $300, or that form part of a set that together cost more than $300, you can claim a deduction for their decline in value.
- Other deductions: Other items you can claim include union fees, costs associated with managing your tax affairs, income protection insurance if paid outside of your super fund, overtime meals and personal superannuation contributions. This year, face masks and gloves for COVID- 19 protection may be deductible, but only if related to earning income.
Expenses that cannot be claimed
While the ATO is focused on helping taxpayers get their deductions right, there are a number expenses that they are on the lookout for and should be avoided when preparing your tax return.
- Travel between home and work.
- Car expenses that have been salary sacrificed, such as a novated lease.
- Car expenses, unless you are transporting bulky tools or equipment that you need to do your job, and that your employer requires you to transport (and there is no secure area to store the equipment at work).
- Meal expenses unless you are required to work away from home overnight.
- Private travel including any personal travel portion of work-related travel.
- Everyday clothing purchases to wear to work, even if your employer requires you to wear them. For example, a suit or black pants.
- Self-education expenses where there is no direct connection to your current employment.
- Phone or internet expenses that are related to your own private use.
As a registered tax agent with more than 50 years of accumulated experience, Teamwork Accounting can help you prepare your personal tax return and ensure a successful and pleasant experience. Contact us for more info.