Follow these tips to maximise your tax refund (or to minimise the tax you have to pay) and to sleep soundly at night, knowing that you’ve satisfied your legal obligations with the Australian Tax Office.
If you’re completing your own tax return through the myGov portal, it must be lodged by 31 October. Most of your data should be automatically pre-filled by the end of July, so all you need to do is check that the details are correct, add in your legitimate deductions and submit. Make sure you include investment income (e.g. dividends and rent), casual, second job or side business income and capital gains or losses (e.g. on the sale of an investment property, shares or cryptocurrency). If you are likely to miss the deadline, a registered tax agent (RTA) should be able to lodge your return for you later than 31 October, provided you register with an RTA before that date.
For a quick introduction to your income tax obligations, watch our short video Pay Your Taxes (4 minutes). It’s designed to help ADF members better understand the tax system, including their rights and obligations.
The Australian Tax Office (ATO) has guides for ADF members that explain what income must be declared and what expenses are allowable as tax deductions. Work-related deductions could include car or travel expenses, uniform expenses, mess fees, self-education expenses you have paid for, and fitness expenses for certain ADF members. If you have worked from home, particularly during the Covid-19 pandemic, you may be able to claim phone, internet and other home office expenses. The ATO has information available on their website about what you can claim.
Only make claims that you can prove with written records (e.g. receipts). While our tax system is basically an honour system, the ATO’s data matching software, which includes comparing your claims to those of your peers, is pretty efficient. Taxpayers are selected at random every year for an audit and if you’ve made larger claims than your peers you may be flagged for closer scrutiny. So you won’t necessarily be asked every year to provide evidence of your claims, but you should be prepared in case you are. Making false or undocumented claims can lead to substantial fines and regular audits of your tax affairs in following years.
If you’re not confident about preparing your own tax return or you need specialist advice, consider using a registered tax agent (RTA), or a qualified accountant if your tax affairs are complex. The areas in which taxpayers make many mistakes (often to their disadvantage) include investment properties, shares and cryptocurrency trading. To establish that the person or organisation you choose is registered, or to find an RTA in your area, use the search function on the Tax Practitioners Board (TPB) website. You can search for a suitable accountant through a professional body, such as CPA Australia or the Chartered Accountants Australia New Zealand.
There are hundreds of options available when choosing a RTA/accountant. Some even advertise in the Defence newspapers. When choosing a provider, make sure they are familiar with the tax deductions available to ADF members and make sure you understand their fee structure (which should be a flat fee, not a percentage of any tax refund to which you’re entitled).
RTAs and accountants generally charge for the preparation of your tax return by reference to the time they spend on it, so being organised can save you money. If you collect receipts on random bits of paper and hand them over in the proverbial “shoe box” or can’t provide the evidence to justify the claims you want to make, you’ll end up paying far more in professional fees or will receive a tax refund which is lower than it should be.
Some RTAs and accountants may also be licensed financial advisers, mortgage brokers or real estate promoters, or they may be part of a network promoting these services. These operators may offer to do your tax return for “free” or at a heavily discounted rate, in return for you agreeing to do a “financial health check” or even signing up to the purchase of investment products from which they will earn commissions or incentive payments. So be aware of the motives of these advisers before you engage them to prepare your tax return. They may not be acting in your best interests.
If you haven’t lodged a tax return for prior years, we recommend you lodge the outstanding return(s) voluntarily, rather than getting caught out by the Tax Office. That way, penalties will generally be lower and arrangements may be made to pay off any outstanding tax in a manageable way. In many cases, you could be due a refund, so lodging outstanding returns may even turn out to be a financially pleasant experience.
If you are fortunate enough to receive a substantial tax refund, use it wisely. An unexpected windfall like this could be used to pay off high-interest debt, set up an emergency fund, or be used to start a savings plan for a larger purchase you may want to make in the future. Consider sitting on your refund for a short time while you carefully think through your options to really make the most of the opportunity.
Need more help or assistance with any of these issues? Contact us and consider signing up to our monthly newsletter which covers tax and other significant consumer issues.
Super can be much harder to quantify if you are a member of MSBS or DFRDB, known as defined benefit schemes. This is because the bulk of your super benefit will likely be in the form of a lifetime indexed pension, based on your years of service and final average salary. The longer you stay in Defence, the larger your lifetime pension. This cannot easily be compared to a standard accumulation super fund. Please contact the Commonwealth Superannuation Corporation (CSC) for an estimate or your current benefit.
If you have an accumulation super fund, like ADF Super, it’s much easier to compare the superannuation you get from Defence with that of a civilian employer. Generally employers pay super at a rate of 9.5% of your ordinary salary and allowances, Defence pays super to accumulation fund members at a rate of 16.4%, well above the minimum requirement.
You may not appreciate the value of your generous superannuation benefits now, but you certainly will in years to come.
ADF members receive, statutory death and invalidity cover, and rehabilitation services if needed. To replace this cover in civilian employment, you may need to take out personal insurance, such as death, disability, trauma and income protection. The cost would depend on your age and personal circumstances but could cost thousands of dollars a year.
The ADF offers free education and training and/or study assistance schemes. If you’ve been receiving tertiary education at no cost or received any form of study assistance, consider what it might cost to continue your education outside Defence.
Take some time to think about these and any other benefits provided to you by Defence to get a better understanding of the real value of your employment package.
As an ADF member you will usually receive subsidised housing or rental assistance if you are not living in your own home. If you buy a home to live in you may be eligible for a range of other assistance schemes.
If you are receiving rental assistance you can calculate the value by multiplying the fortnightly assistance amount by 26 to get an approximate annual benefit.
If you’re in service housing you can estimate your benefit by deducting the rent contribution taken out of your pay, from the amount of rent you would pay each fortnight for a similar property in the same area. Multiply the result by 26 to estimate your annual benefit.
Housing assistance schemes for members buying a property include the Defence Home Ownership Assistance Scheme (DHOAS), Home purchase assistance scheme (HPAS) and Home purchase or sale expenses allowance (HPSEA)
Serving ADF members receive a range of healthcare benefits, including free medical and dental treatments, rehabilitation services, psychological support and access to fitness facilities like gyms, pools and sporting fields.
To put a value on these benefits, think about what you might be paying for if you were not an ADF member. For example, what would it cost you for private health insurance, prescriptions, physiotherapist, dentist, specialist visits, gym membership or other fitness related costs?
Medicare covers the costs of being admitted to hospital as a public patient, some of the fees charged by GPs and other medical professionals, and subsidised prescription costs for medicines listed on the Pharmaceutical Benefits Scheme (PBS). ADF members don’t pay the Medicare levy, currently 2% of taxable income.
Private health insurance covers some or all of the cost of a range of services not covered by Medicare, for example, a private hospital and the doctor of your choice, as well as ancillary services such as dental, optical and physiotherapy, not covered by Medicare.
Your pay consists of a base salary, with the addition of employment-related allowances. Your base salary can be found at the top of your payslip on the right, listed as ‘Annual salary’. If you need help reading your payslip, see the ADF guide on Pay and Allowances.
Note: From 13 May 2021, service, trainee, reserve and uniform allowances will be rolled into a single ‘Military salary’.
The earnings section of your payslip lists any allowances you receive. The amount in the ‘Current’ column is the amount you get every fortnight for each allowance. You can add allowances by typing in the name of the allowance in the ‘Add allowance’ box and clicking the + symbol.
A deployment provides some ADF members with additional allowances that are not part of regular pay. We have not included these allowances in the calculation of your remuneration package, however, you may want to take the additional deployment allowances into account if you are comparing your ADF remuneration with civilian employment.
Medium-term goals are those that you want to achieve in 3-6 years. This could include saving for a home deposit, paying off your car or paying down all your loan debts. Having a budget and your goals written down.
Long-term goals are plans you want to achieve in around 7 years or more. This could include buying a home or paying off your mortgage, paying for your children’s education or saving for retirement.
For long-term goals think about investing some of your money. Get some financial advice to work out a good investment strategy to reach your goals.
Be financially fit from ADF Consumer Centre on Vimeo.
MSBS is a hybrid defined benefit and accumulation super scheme which closed to new members on 30 June 2016. If you are an MSBS member, your benefit will consist of a lifetime indexed pension (employer component) based on your final average salary and years of service. Some or all of this benefit can be taken as a lump sum when you have met a condition of release (the defined benefit). The scheme also has a member component made up of your compulsory and voluntary personal contributions, ancillary contributions and investment returns, that you will also receive as a lump sum when you have met a condition of release (the accumulation benefit).
The pension component can be taken from age 55. If you are retiring or resigning from the ADF after reaching age 55 or are entitled to a Class A or Class B invalidity pension, you will be eligible for a pension when you leave the Service. For all other members, your employer benefit will freeze and be preserved, increasing with CPI each year, until you are eligible to receive it.
The member component of your benefit may be left in MSBS, where it will increase with investment returns each year until you access it, or it can be rolled over to another complying super fund.
For more information contact the Commonwealth Superannuation Corporation (CSC).
If you joined the ADF for the first time after 30 June 2016, you will fall under the ADF superannuation arrangement, and will be a member of an accumulation fund, such as ADF Super. If you had previously served, and are a member of MSBS, you will be re-entered into MSBS on rejoining the Service.
For accumulation fund (eg. ADF Super) members, your benefit will be a lump sum based on contributions and investment returns. When you leave Defence, your money can be left in the fund, where it will continue to grow with investment returns until you meet a condition of release, or it can be rolled into another super fund.
If you’ve been in the Service for more than 12 consecutive months, you can keep your ADF Super account when you transition out and your new employer can contribute to ADF Super. In this case your insurance cover will change so contact the Commonwealth Superannuation Corporation (CSC) to find out what you need to know.
DFRDB is a defined benefit super scheme which closed to new members on 30 September 1991. If you are a DFRDB member, you will receive a lifetime indexed pension based on your final salary and years of service. Part of your benefit may be commuted into a lump sum, and you may receive an additional lump sum from your MSBS ancillary account, made up of voluntary personal contributions, amounts transferred in from other funds and other contributions, plus investment returns.
For more information contact the Commonwealth Superannuation Corporation (CSC).
Short-term goals are things you want to achieve within the next couple of years. These goals could be to pay off your credit card debt, buy a new TV, go on a holiday or buy a car. Whatever you have in mind, set yourself a realistic timeframe. The best way to save for short-term goals is to reduce your spending on non-essential items, like entertainment, dining out, memberships or subscriptions. It is often easier to stay on top of your spending if you use cash, EFTPOS or a debit card when shopping instead of using your credit card.
Make your savings work for you by putting your money into an account where it will grow. Savings accounts are great because you can earn compound interest on your savings. If you’re on a low income, you may qualify for one of the savings programs offered by some charitable organisations.