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Tax Returns Made Easy With The Do’s & Do Not’s Of Work-Related Expenses

The end of the financial year is coming up next month (30 June), and you may be looking for ways in which you could make tax savings in this year’s tax return. This could be through tax deductions, expenses that you could make now for your work purposes or even with tax offsets introduced by the government. Whatever your tax situation, we’re equipped and ready to help you navigate the tricks and traps of income tax returns.

Upon completing a tax return, individuals are entitled to claim deductions for expenses that are directly related to their income. These can come in a variety of forms, but must usually be work-related to be claimable. 

There are three requirements individuals must meet to be able to claim a work-related deduction:

  • the individual must have spent their money and not be reimbursed for it
  • the expense must be related to their job and;
  • there must be a record, like a receipt, to be able to prove it.

If an expense was for work and private purposes, individuals can claim a deduction for the work-related portion.

Here are some common types of deductible expenses taxpayers like employees and rental property owners can claim this financial year:

Home Office Expenses

The past year may have seen you working more from home or remotely than ever before, and setting up a home office may have incurred a number of additional expenses. Some of the expenses that you may be able to claim as tax deductions include

  • Phone and internet expenses
  • Computer consumables (such as printer paper and ink) and stationery
  • Home office equipment (such as computers, phones, printers, furniture, etc). 

With home office equipment, you may be able to claim either:

  • the full cost of the items (if less than $300 in value) or 
  • The decline in value (also known as depreciation) for items over $300.

Unless you meet very specific requirements, you probably will not be able to claim for home expenses, such as mortgage interest, rent and rates, or the cost of general household items. 

If you plan to use the temporary ATO approved ‘shortcut method’ (80 cents per hour for all additional running expenses) to claim your deductions, you cannot claim any other expenses for working from home for that period. If you purchased a desk to use when working from home for example, you cannot claim a deduction for that separately as it is covered by the 80 cents per hour work rate. The deadline for this method of calculation is 30 June 2022 (unless it is extended). 

Clothing Expenses

Individuals can make a claim for work-related clothing expenses including compulsory, non-compulsory and registered uniforms, occupation-specific and protective clothing, and expenses associated with work-related clothing, such as dry cleaning, laundry and repair expenses.

Self-education Expenses

Individuals can prepay self-education items before the end of the income year, including:

–        course fees (not HECS-HELP fees), student union fees and tutorial fees

–        stationery and textbook purchases

Other Work-related Expenses

Individuals can prepay the following expenses before 1 July 2022:

–        union fees

–        seminars and conferences

–        subscriptions to trade, professional or business associations

–        subscriptions to magazines and newspapers

If you are looking for assistance in working out potential expenses that you could incur prior to the end of the financial year, have queries about your claims or just want to prepare for 30 June 2022, start a conversation with us now. We are tax planning professionals ready and willing to help. 

 

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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