These are our top tips for tax time. Follow these and you might just get yourself a bigger tax refund (or at least minimise the tax and fees you have to pay):
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 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, gig economy income, or capital gains in your return. If you miss the deadline, a registered tax agent will be able to lodge your return for you.
For a quick and easy introduction, 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 is allowable as 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’ve 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 on what you can claim.
Only make claims that are genuine and that you can prove. Our tax system is based on an honour system, however the ATO’s data matching software, which includes comparing your claims to those of your peers, if pretty efficient. Taxpayers are also selected at random every year for audit and if you’ve made larger claims you may be flagged for closer scrutiny. So you won’t necessarily be asked 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 preparing your own return, or you need specialist tax advice, consider using a registered tax agent (RTA), or a qualified accountant if your tax affairs are complex. To check 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).
Tax agents 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 may be operating as a collective group of professionals from the same office. These operators may offer to do your tax return for free, or at a heavily discounted rate, in return for you agreeing to a “financial health check” or the purchase of investment products from which they will earn an incentive payment. Be aware of the motives of such 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 previous years, we recommend you lodge the outstanding return(s) voluntarily, rather than getting caught 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 can even be a financially positive 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 used to start a savings plan for a larger purchase you want to make in the future. Consider sitting on it for a short time while you think through your options to really make the most of the opportunity.
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