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.
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