Boost your 2021 tax return: Top tips for a bigger refund
It's tax time! Finder's money experts share their tips to claim deductions on everything from your home office, car and insurance to your mortgage.
Tax time can either fill you with excitement (if you're expecting a nice return) or dread (if you've got a tax bill to pay, or lots of paperwork to do). Regardless of whether you consider yourself a tax novice or pro or how much you earn, there are likely to be tax deductions you're eligible for without knowing it.
Here are some top tax tips brought to you by the Finder money team.
How to (properly) claim working-from-home costs
Alison Banney, banking and investment editor
The ATO is allowing you to claim 80 cents for each hour you spent working from home over the last year. This is a "catch-all" deduction that covers all your working-from-home expenses between 1 July 2020 and 30 June 2021.
For example, let's say you worked at home 2 days a week for the past year, and your work day is 8 hours. That's 104 days which works out to be 832 hours over the year. As you can claim 80 cents per hour for each hour you've worked from home, you can claim $645.60 when lodging your tax return. If you've worked from home for 40 hours a week over the full year, you can claim about $1,664 on tax.
There's a few things to keep in mind when using this method. Firstly, make sure you minus any sick days, annual leave days, public holidays and days you worked in the office from your tally as the ATO has said it will be monitoring this. You also can't make another claim for any form of home-office expense (such as Internet or phone bills), as this is a "catch-all" deduction.
Most importantly, don't forget to add the reference "COVID-19 hourly rate" when you enter this deduction in your return, so the ATO knows what it is you're claiming.
How to claim on your mortgage if you run a business from home
Sarah Megginson, senior home loans editor
For some workers, there may be a way to claim even more at tax time for working from home. I have been a dedicated home-based worker for the better part of a decade. As a long-term freelancer and contractor, I have been "conducting a business from my home", according to the ATO.
I've set aside an entire room in my house as my workspace. In my home office I have a desk and chair, printer, bookshelf full of work-related books and resources, stationery and some storage. In other words: it's a completely dedicated space for work.
Many years ago, my accountant advised me that I can claim the costs of running my business from home as a result. I had to work out the total size of my home, and the footprint that my home-office covers (around 15%).
This means I can claim 15% of costs like my mortgage interest or rent, council rates, energy bills and more, because I'm producing an income from my home. If this is a deduction you can use, you could be able to claim several thousand dollars at tax time.
To use this method, you need to have a dedicated work area, such as a home office when you work from home. But the caveat to consider with this is: if you claim a portion of your home expenses as a work deduction, you are essentially claiming that you are producing an income from your home. That income-producing portion (in my case, 15%) of your home will likely be subject to capital gains tax if and when you sell the property.
This isn't an issue if you rent, but either way, it can get a little complicated. So, it's worth engaging an accountant to make sure you take advantage of the best tax strategy and deductions for your situation.
Tips for claiming travel expenses (and how not to claim a Dyson)
Angus Kidman, global editor-in-chief
Reminder if you're working 2 jobs: While you can't claim a tax deduction for travelling to and from your normal place of work, you can claim a deduction for travel between workplaces. So if you took a bus to your retail job in the morning, then a train to your restaurant job at night, then another bus home, you can claim the cost of the train journey.
The same applies if you just have 1 job but have to travel to other work sites during the day, or attend work meetings or conferences. If you use your own car to do this you can claim a portion of your car-related expenses. But remember, you can't claim that expense if you've been reimbursed for it already by your employer.
I was asked this question on TV earlier this year: If you have to work from home, can you claim the costs of a new Dyson so that your place looks okay on Zoom? The blunt answer is "no". You can potentially claim some cleaning costs for a dedicated home office, but not the entire cost of a new Dyson, especially as you'll undoubtedly use that for non-work purposes. (And remember, if you're using the 80 cents an hour method, you can't make any other claims; that's double-dipping.)
Tax tips for freelancers
Amy Bradney-George, acting credit cards editor
When I was working on a freelance basis, I set up a separate account for my tax payments. I found this a lot easier to manage than keeping all my money in one account (with the risk of not having enough money saved if I got a tax bill).
I also found an accountant that I trust, and often ask them questions about what I can and can't claim as tax deductions. It has changed over time, but as someone who has (mostly) worked from home for over 10 years, I know there are times when not using shortcuts gives you more value. For example, if you usually work from home and use your own computer and other devices, it might make financial sense to claim these expenses separately – instead of using the 80c an hour option – as some of them will depreciate.
As someone with strong ties to the arts and entertainment industry, I also know that sometimes taxes can be tricky (even if you don't earn much). My top tip is to ask questions: Chat to your accountant or call the ATO – I've done this in the past and found them so friendly and helpful.
Claiming on your investment property
Richard Whitten, senior home loans writer
If you're a property investor, the costs of owning and maintaining your investment property are tax deductible. You claim the cost of repairs, home loan fees and interest, but not the actual loan principal. You can even claim the decline in value of depreciable assets in the property.
Claiming on your insurance
James Martin, senior insurance writer
Getting money back from your insurance isn't usually the first thing that comes to mind when it comes to tax. But millions of Aussies already pay less tax through a rebate each year via their private health insurance. When you lodge your tax return, the government will essentially income test you to work out if you're entitled to a partial refund on your premiums.
Do you have income protection insurance? You'll be pleased to know that payments made towards an income protection policy can be tax deductible. Premiums can be claimed as a tax deduction if you've paid for them with your own money (as opposed to, say, those made for life policies held within your super fund, which often can't be claimed for).
There are also some (fairly limited) circumstances when you can claim a deduction for car expenses, including car insurance. Examples can include if you're using your car as a ride-sharing service or as an employee travelling for work. But if you don't use your car for work, it's unlikely you can claim car insurance on tax.
Although the 2020-21 financial year has just ended, if you earn more than $90,000 a year you could lock in savings for next tax time now by opting for private health insurance. This is because of the Medicare levy surcharge (MLS), which applies to single people who earn more than $90,000 and couples or families with a combined income of over $180,000.
With the MLS, you'll be automatically taxed an extra 1%-1.5% of your income if your earnings fall within the figures outlined above and you don't hold private hospital insurance. The good news? You can avoid the surcharge with a hospital policy that costs less than $20 a week. In fact, you could actually save cash by taking out insurance. Say you earn $95,000 — that means you'll pay a $950 MLS tax, but you can get a basic hospital policy for $813, so you could save $137 a year.
Insurance and tax can be a tricky area, so it's best to speak with a tax agent or accountant if you have any doubts about what you can or can't claim.
How to claim the cost of doing your tax (because yep, you can!)
Alison Banney, banking and investment editor
I've been writing about tax for several years now and I don't think there are many tax deductions that are more easily forgotten about than this one.
The cost of doing your taxes is itself a tax deduction (because lodging your tax return is ultimately work-related). This means the fee you pay your accountant or tax agent, as well as the cost of travelling to their office, is tax deductible.
If you're trying to decide whether you should use an agent or not, our comparison of using a tax agent vs lodging online yourself may help you choose. And if you want more tax tips on what you can claim, there's a full list of extra tax deductions in our guide.
