Most people dread tax time. The thought of sifting through receipts and paperwork can be overwhelming. Financial expert, Elson Goh, shared, “There are some who love tax time and would love to do taxes, but the majority of us probably hate it and hope it would just go away.“

The Challenge of Deductions

One of the biggest headaches at tax time is managing deductions. Everyone wants to minimise their tax liability, but this often leads to confusion and frustration. “People want more deductions because more deductions mean less tax to pay,” Elson explains. However, the process is not straightforward, and it’s easy to make mistakes.

The Australian Taxation Office (ATO) has made self-lodgement easier by pre-filling information like income, bank interest, and dividends. However, deductions still need to be manually entered. While using an accountant or tax agent can provide helpful advice, it doesn’t guarantee you won’t be audited. “The use of an accountant does not prevent an audit or review,” says Elson.

What Is the ATO Looking for?

Each year, the ATO focuses on specific areas. This year, they are targeting:

  1. Incorrectly claiming work-related expenses, especially for those working from home.
  2. Inflating claims for rental properties.
  3. Failing to include all income, including side hustles and cryptocurrency.

If you receive a notice for an audit, don’t panic. Most of the time, the ATO seeks clarification on specific areas. “If you do make a mistake, admit it rather than try to hide it,” advises Elson.

Work-Related Expenses

Understanding what qualifies as a work-related expense can be tricky. Elson provides a simple rule: “If you spend the money, if it’s related to your work, and if you’re not reimbursed by your employer, then you are 90% safe.” However, it’s crucial to note that everyday clothing is not tax-deductible unless it’s a uniform or has a company logo.

Claiming Travel and Other Expenses

Travel expenses can be claimed if you travel for work, but not for commuting from home. The ATO offers two methods for claiming travel expenses: the logbook method or the cents-per-kilometer method. Elson advises using an app for the logbook method to simplify record-keeping.

Specific Deductions

The ATO provides occupation-specific guides for work-related deductions. For media professionals, for example, allowable deductions include travel expenses between locations and new subscriptions. However, grooming expenses like haircuts and cosmetics are not deductible, even though the occupation might expect a well-groomed appearance.

Rental Property Claims

With the rise in rental prices, landlords might feel tempted to inflate claims to offset increased rental income. The ATO distinguishes between capital expenses (e.g., installing a new air conditioner) and repairs, with capital expenses not being deductible.

Elson’s Tax Tips

  1. Set Aside Money: If you have multiple jobs or variable income, save some money for potential tax bills.
  2. Wait for Pre-filled Data: Ensure all information from banks is pre-filled before lodging your tax return.
  3. Don’t Miss Deadlines: Lodge your tax return by August 31, or use a tax agent to extend the deadline to mid-May 2025.
  4. Charitable Donations: Donations to registered charities over $2 are tax-deductible without ambiguity.

Tax time doesn’t have to be a source of stress. By understanding the process, utilising available resources, and staying organised, you can navigate tax season smoothly. Remember, paying taxes is a sign of income, and managing your finances effectively can lead to a less stressful and more productive year.

Listen to Elson Goh’s full chat on Table Talk below!