Many people are afraid of taxes or view them as a chore to be delayed as long as possible. But tax time can be a great opportunity to save money if you have a good understanding about the income tax rebates that apply to your situation and the deductions you are eligible for.
Everyone should be aiming to claim the deductions and income tax rebates they are entitled to. But the truth is that many people are paying more tax than they need to. This is because they are not aware of how they can make income tax work for them.
Workers in different industries can make all sorts of different claims on their tax returns. The rules for making deductions are surprisingly simple:
- You need to have incurred the expense without being reimbursed by your employer
- The expense must have been related to your job
- You need a written record of the purchase
The ATO provides a calculator to help determine deductions like work-related car and travel expenses. But there are all sorts of unconventional deductions you can make that no online tool will help you figure out. Examples of unconventional deductions include:
- Gym fees
You can claim gym fees and gym equipment that costs $300 or less if maintaining physical fitness is vital for your job. For example, a professional athlete or personal trainer would be able to make these deductions.
- Sun protection
Workers who have to be outside to do their job can claim deductions on sunscreen, hats and sunglasses.
If you need a guard dog, cattle dog or any other working dog, you can claim deductions on its food and vet bills.
To develop a smart tax strategy, simply learn what you can claim in your industry, track expenses closely and keep written records. Remember that you may need to defend your deductions and that they have to make sense in context. The ATO will find out if you’re trying to claim deductions on the family dog.
Income Tax Rebates
Tax rebates or offsets directly reduce the amount of tax you pay on your taxable income. Income tax rebates can reduce your tax payable to zero but generally can’t get you a refund.
Some offsets are automatically calculated by the ATO while processing your tax return, including offsets for low-income earners and receivers of government benefits. There are several other tax rebate categories that you may be able to make a claim on.
You are entitled to a certain amount of private health insurance rebate depending on your income level. This can be claimed as a refundable offset through your tax return or a reduction in the price charged by an insurer
You may be entitled to a tax rebate if you cared for an invalid who is your:
- Child or sibling aged 16 or over
- Spouse’s child or sibling aged 16 or older
- Parent or spouse’s parent
Claims for this rebate include eligible expenses for disability aids, attendant care or aged care minus refunds from Medicare, private health insurers and the National Disability Insurance Scheme. Note that this tax rebate is income tested and is being phased out.
Superannuation-Related Tax Offsets
If you make contributions on behalf of yourself or your spouse, there are two offsets you might be able to claim:
- Super Income Stream Tax Offset – If you receive income from an Australian super income stream, you may be able to claim an offset equal to 15 per cent of the taxed element or 10 per cent of the untaxed element.
- Tax Offset for Super Contributions on Behalf of Your Spouse – If you made contributions to a super fund or retirement savings account on behalf of your spouse who is earning a low income or is unemployed, you could claim up to $540 per year. There are very specific qualifications for this, though.
Zone and Overseas Forces
You can claim the Zone tax offset if you have lived or worked in a remote area for 183 days during the income year. You may be eligible for the overseas forces tax offset if you serve overseas as a member of the Australian Defence Force, the Australian Federal Police or the United Nations Armed Forces.
Keep in mind that this is a basic overview of the income tax rebates and deductions you might be able to claim. You should speak with a financial service professional to determine how these might apply to your personal situation.