Want to make tax time as smooth, easy and fast as possible? Don’t get caught up in believing any of the many myths that crop up around the end of financial year.
The Australian Taxation Office has delivered a warning to Australians about a number of ways their actions may result in them taking longer to receive their tax refund. According to assistant commissioner Karen Foat, “Every year we see people tripped up by tax time myths”. “Unfortunately, this often results in slowing their return down when either they or we realise their mistake as the return is processed,” she stated.
Usually, tax returns that are lodged electronically are processed in less than two weeks – but amendments can slow down this process. Where it doesn’t delay the initial return, it can lead to a surprise tax bill later down the track. According to the assistant commissioner, there are always myths that the ATO must disprove at tax time.
With people working from home its important to understand what expenses can be claimed and how. Here are some important myths you should steer clear of falling prey to, and the real-life facts from the ATO you should take note of:
Truth #1 Your preferred bank details for your return don’t update themselves.
While the ATO does receive information from the banks, this does not extend to updating the details for the bank account you nominate to have your refund deposited into.
Truth #2: It is definitely not OK to double dip.
Ms Foat said the Tax Office has already expressed concern that some taxpayers may either accidentally or deliberately double dip by claiming their working-from-home expenses using the allinclusive shortcut method while also claiming for specific items such as laptops or desks. She highlighted that “it’s important to remember that if you’re claiming under the shortcut method, you cannot claim a separate additional deduction for any expenses you incur as a result of working from home.”
Truth #3: Most people cannot claim home-to-work travel.
Unless you are required by your employer to transport bulky tools or equipment and there is no safe place to store these at your workplace, you cannot claim the cost of travelling from home to work. Similarly, “If you are working from home due to COVID-19, but need to travel to your regular office sometimes, you still cannot claim the cost of travel from home to work as these are still private expenses. Even though you are working from home, your home is still a private residence – it is not a ‘place of business’,” Ms Foat explained.
Truth #4: You can’t just claim money you haven’t actually spent.
The Tax Office often sees people claiming a deduction without actually having purchased anything. “When we question them, we often find it’s because they thought everyone is entitled to claim $300.”
“While you don’t need receipts for claims of expenses up to $300, you must have actually spent the money and be able to show us how you worked out your claim,” Ms Foat explained.
Truth #5 Work-related expenses must be workrelated!
The Tax Office sees people try to claim personal expenses under the guise of work-related expenses every year – but you can actually only claim for expenses that are directly related to earning your income.
One particular example is hand sanitiser: “We have been reminding taxpayers recently that if they are in jobs that require physical contact or close proximity to customers and they had to buy their own hand sanitiser, gloves or masks for use at work, that they can claim these items,” Ms Foat said.
But for people working in jobs that aren’t in close proximity to the public or where people have purchased these items for their general use, this expense can’t be claimed.
“For example, people who are working from home can’t claim these items, and so a high work-from-home claim together with a large claim for protective items may trigger a red flag and slow down your return,” the assistant commissioner said.
You also shouldn’t attempt to claim for home-schooling, with Ms Foat advising Australians against attempting such a claim – “these costs are private expenses.”
Truth #6 Lodging early does not always mean getting your refund earlier.
While the ATO does automatically include information from employers, banks, private health insurers, and JobKeeper and JobSeeker amounts, this is not normally ready until the end of July. Since leaving out income can slow your return down, the ATO advises anyone who does wish to lodge prior to that being ready to ensure all of that information is manually included.
Need help with your tax return? Give the team at Steve May a call and start a conversation today. Remember, we are not tax accountants, but we are happy to assist where we can or refer you onto one of our trusted tax accountants.
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Nick Shanley, Steve May and Luke Styles are Authorised Representatives of Sensibly Pty Ltd (AFSL 533923)