Tax planning can feel stressful at the best of times. However, when it’s tax time, paying close attention to allowable deductions may lower the tax you need to pay on your tax return. Here are some allowable deductions you may wish to consider when preparing your next return.
While every person’s financial circumstances are unique, it can be helpful to be aware of some of the different deductions that may apply when you are next doing your tax planning.
Tax agent costs
Hiring a registered tax agent to lodge your tax return is a great way of organising your finances, however, sometimes it can be expensive. The good news is that you may be able to deduct any fee you incur for your agent to prepare or lodge your tax return in the next financial year.
When you next make a donation, check if the organisation is a deductible gift recipient (DGR) and the amount is over $2. If so, then you may be able to claim any donations you have made as a tax deduction. To qualify, the donations must have been made with nothing received or expected to be received in return and be recorded with a receipt.
Insurance premiums for income protection
Generally, premiums paid by Australian resident individuals for income protection insurance under a policy they own may be claimed as a tax deduction to the extent that the premiums are paid for benefits that are designed to replace the individual’s lost income. If you claim on your income protection policy, any income replacement benefits received are generally assessable as income and liable for income tax just like your regular income.
Education and training
If you are completing any courses that relate to your current job, lead to formal qualifications, improve your skills or knowledge and are likely to lead to increased income, then these course fees may be deductible. Any other costs associated with undertaking the course may also be deductible such as textbooks, student service fees and travel between home or work and the place of education.
COVID-19 Working From Home
With many people’s working arrangements changing due to COVID-19, the ATO has created a shortcut method to help calculate deductions when working from home. You can claim your working from home expenses for the period between 1 March 2020 to 30 June 2020 in the 2019-20 income year and 1 July 2020 to 30 September 2020 in the 2020-21 income year if certain conditions are met. The deduction which can be claimed is 80 cents for every hour you worked in the 1 March – 30 June 2020 period and applies to electricity expenses, cleaning expenses, internet costs and computer consumables.
Certain job-specific purchases can be valid tax deductions. For example, if your job requires you to spend time outside on a daily basis then you may be able to claim a deduction for sunscreen costs. You may be able to claim a deduction for a handbag or satchel you buy to carry items for work purposes such as laptops, tablets or work papers. The amount of the deduction depends on the extent you use the bag for work purposes. You can find out more information on the ATO website.
Your life is unique and so are your personal finances which is why your tax planning is so important. There is no one-size-fits-all approach, so you should take into consideration your individual circumstances when preparing and lodging your tax return and seek expert advice.
Speak with Sherlock Wealth for help with information on tax planning and preparation to help plan for your financial goals and future. If you’re looking for guidance with financial planning, get in touch here.
NOTE: All information refers to Australian resident individual taxpayers and has been informed by the Australian Tax Office website.
Information was correct at the time of writing (July 2020) but may be subject to change.
Information provided in respect of taxation law is given in good faith and for the general information purposes of Australian tax residents only. It is believed to be accurate as at July 2020 but may be subject to change. As the application of tax law depends on each person’s individual circumstances, you should always seek advice from a qualified tax professional.