Maximise Your Tax Return - Part 2
In the Philippines, we do not have this unless you own a business. Tax minimisation is an ethical and legal way of reducing your taxes. You're making use of your tax benefits to lower your taxes. So what are the ways that we can actually do this?
📌 Before you get excited, not all can make a claim. You need to meet the criteria set by ATO - it must be directly related to earning your income, you must have spent the money yourself and not reimbursed and not contrary to law. Most importantly, 👌you must be able to show ATO how you calculated the claim.
📌You may be liable to penalties for making false or misleading statements or taking a tax position that is not reasonably arguable. The penalty will not be imposed if either of the following apply:
- you took reasonable care in making the statement (but you may still be subject to another penalty provision, such as taking a position that is not reasonably arguable)
- your statement accords with our advice, published statements or general administrative practices in relation to a tax law.
👉 Track and Claim All Allowable Deductions
🚗 D1 - D2 Work related car and travel expenses
- directly between two separate workplaces - for example, when you have a second job (if one of these places isn't your home)
- from your normal workplace to an alternative workplace that is not a regular workplace (for example, a client's premises) while still on duty and back to your normal workplace or directly home
- if your home was a base of employment - you're required to start your work at home then travel to a workplace to continue your work for the same employer
- if you had shifting places of employment – you regularly work at more than one site each day before returning home
- from your home to an alternative workplace that is not a regular workplace for work purposes, and then to your normal workplace or directly home (this doesn't apply where the alternative workplace has become a regular workplace)
- if you need to carry bulky tools or equipment that your employer requires you to use for work but you can't leave at your workplace (for example, an extension ladder or a cello) – the tools or equipment are bulky, meaning that because of the size or weight they are awkward to transport and can only be transported conveniently by motor vehicle.
- you do minor work related tasks - for example, picking up the mail on the way to work or home
- you have to drive between your home and your workplace more than once a day
- you are on call – for example, you are on stand-by duty and your employer contacts you at home to come into work
- there is no public transport near where you work
- you work outside normal business hours – for example, shift work or overtime
- your home was a place where you ran your own business and you travelled directly to a place of work where you worked for somebody else
- you do some work at home.
- Cents per km - maximum of 5,000 per km (Code Claim Type: S)
- Logbook method - must cover at a minimum 12 continuous weeks (Code Claim Type: B)
- protective in nature - including safety boots and sun protection (Code Claim Type: P)
- a compulsory uniform such as corporate uniform with the company's logo (Code Claim Type: C)
- a non-compulsory uniform registered by the employer. (Only designs of uniforms or wardrobes which are not protective clothing, occupation specific clothing or compulsory for an employee to wear while at work, need to be registered.) (Code Claim Type: N)
- occupationally specific, such as the clothing worn by chefs and nurses but (according to the tax office), not waiters (Code Claim Type: S)
- $1 per load - this includes washing, drying and ironing - if the load is made up only of work related clothing
- 50 cents per load if other laundry items are included
- upgrading your qualifications for your current role. (Code Claim Type: O)
- improving your skills or knowledge used in your current role. (Code Claim Type: K)
- a trainee and the course you take forms part of the traineeship. (Code Claim Type: O)
- able to show the course you were taking led to, or was likely to lead to, an increase in your current salary. (Code Claim Type: I)
- might generally related to it - such as undertaking a full-time fashion photography course and working as casual sales assistant on the weekends
- enables you to get new employment - such as moving employment as a nurse to employment as a doctor
📌You cannot claim deductions for expenses incurred in actively seeking paid work if you receive Newstart/Jobseeker or Youth allowance.
- union fees and subscriptions to trade, business or professional associations
- certain overtime meal expenses
- professional seminars, courses, conferences and workshops
- reference books, technical journals and trade magazines
- the work-related portion of safety items such as hard hats, safety glasses, sunscreens and other protective items due to COVID-19
- the work-related portion of some computer, phone and home office expenses
- the work-related portion of tools and equipment and professional libraries (you may be able to claim an immediate deduction for the full cost of depreciating assets costing $300 or less.
- interest charges ATO imposed on you
- litigation costs (including court and Administrative Appeals Tribunal fees, and solicitor, barrister and other legal costs you incurred in managing your tax affairs)
- other expenses you incurred in managing your tax affairs, including:
- preparing and lodging your tax return and activity statements
- fees paid to a recognised tax adviser for preparing and lodging your tax return 👌
- travel to obtain tax advice from a recognised tax adviser 👌
- buying tax reference material 👌
- dealing with us about your tax affairs.
- the cost of tax advice given by a person who is not a recognised tax adviser
- a deduction for tax shortfall and other penalties for failing to meet your obligations.
- Income protection, sickness and accident insurance premiums
- Expenses related to income earned from the sharing economy or other marketplace which is not derived from carrying on a business or as an employee of the digital platform
- made the personal super contributions to an eligible super fund
- given your super fund a valid Notice of Intent to claim or vary a deduction for personal contributions form by the earlier of > the day you lodge your tax return for the year in which you made the contributions or > the end of the income year following the one in which you made the contributions
- received written acknowledgement of the Notice of Intent from the super fund
👉 Capital Gains/Losses
Capital gains tax in Australia is not a separate tax; it will be added to taxable income and taxed at marginal rate. Hence, there is no capital gains tax rate unlike in the Philippines.
So if you make a capital loss, you can't claim it against your other income but you can use it to reduce a capital gain (Net capital losses carried forward to later income years).
You can generally discount a capital gain by 50% if they hold the asset for more than one year.
For those who have a private health insurance, you can claim a rebate to help towards the cost of your private health insurance premiums. The rebate is income tested so this depends on your income for surcharge purposes. (Note: Ensure it is an appropriate level of private hospital cover. 'Extras' like optical, dental are not private patient hospital cover. For singles, an appropriate level of cover must have an excess of $750 or less. Couples or families must have an excess of $1,500 or less.) Below is a sample statement from your provider. You just follow the letters - B, name of provider; C, insurer ID; J- premiums paid etc.
The ATO allows you to claim the costs of your income protection premiums for policies taken out separate to your Super.
Your provider will send it directly to ATO and will also notify you about it. They'll be sending the statement showing how much you paid and how much you can claim. If you want to lodge early and this has not been prefilled yet, you can call your provider about it.
👉 Other Expenses
If you have other investments, you can deduct bank fees, financial advisor fees, interests etc. as long as the income earned is included as part of the assessable income and the expense is not private in nature.
"Negative gearing". For those who want to create rental income. It has some tax benefits but you should seek professional advice to determine if it's right for you. I was excited when I heard this but for now, a pass for me. 😊
The above-mentioned is not an exhaustive list of everything you can claim or not claim so be sure you speak to a professional or you can refer to the ATO for further information.