It’s that time of the year again where Australians across the country are preparing for our tax returns, hastily searching for paperwork and receipts of the past 12 months.
Likewise, businesses are methodically getting expenses in order, in anticipation of an almost $20 billion in work-related expenses we try to claim every year.
Whilst there are lots of unusual or surprising things that individuals and businesses can claim – such as the office X-Box, lubricants or gels for adult industry workers, or tradesman’s tools – there are some things that are simply off limits or not as straightforward as we may expect. Here are 5 myths that are commonly misunderstood.
Myth No.1: I will always get a refund
The first and possibly most important myth is that PAYG workers believe they will always get a tax refund regardless of their employment circumstances. Unfortunately, PAYG taxpayers don’t get a refund by magic; it is because they have paid too much tax for the year. See your ITP consultant to determine your refund eligibility and to obtain the maximum amount you are entitled to.
Myth No.2: I get refunded for all my deductibles
Another common myth that needs addressing is that every dollar you spend on deductible items is a dollar returned from the ATO. Again, this isn’t the case; the truth of the matter is that the total amount of your deductions is subtracted from your total income. This means that your total income is reduced and you will therefore only pay tax against that reduced amount. If like many, you sit on the lower tax rates, you could be saving as little as 20 cents in the dollar.
Myth No.3: I can claim all travel expenses
A myth that often raises its head at this time of year is whether or not driving to work is deductible work-related travel. Generally speaking, driving between home and the office is not deductible. There are some instances, however, where a claim for car travel could be made, for instance: if you use your car to travel between multiple work locations each day before embarking on your trip home, you may be eligible to claim for travel expenses.
Myth No.4: Tax loopholes
Quite often you hear the phrase “there are exclusive loopholes to avoid tax” banded around. Sorry, again this is another myth that is regularly heard and one that we in the industry like to call ‘fraud’. By visiting an ITP specialist, we will allow you to develop strategies which will legally assist in minimising the amount of tax you pay and allow you to tax plan for the following years.
Myth No.5: Paying tax is a bad thing
The final myth to be discussed here is that paying tax is a bad thing which isn’t entirely true. If you are paying tax, then you have an income which is obviously a good thing. The more tax you are paying, the more you are earning and again – theoretically a good thing. By paying our taxes correctly and in full and with the strength of our economy (particularly compared to other countries), it all points to the fact that the tax system is working. And whatever you spend on getting your tax return done with ITP now, will be claimable in next year’s tax time. We think that sounds pretty good.
If you have any questions or queries or just need a myth debunking, make an appointment to see an ITP consultant who will help you make sense of your taxes and point you in the right direction.