You shouldn’t do your own tax return if it involves any of these items
When lodging your tax return, there are elements that can either increase or decrease the size of your refund. Some are easy to understand, while some are a bit more complex. If you aren’t a tax expert, those complex items can prove to be a bit tricky when it comes to lodging your return by yourself.
In this article we discuss some of the factors that need to be considered when preparing your tax return, and how they can affect your refund.
Deductions made while working from home
The spread of COVID has changed how we conduct business. Primarily, we’ve seen an increase of employees working from home as a precautionary measure.
If you are a sole contractor or freelancer, where remote working was already a way of life, you may already be familiar with the pitfalls and complexities that come from making deductions for your home office.
You might be able to claim deductions on expenses and items that you didn’t know you could claim. Or, you may feel inclined to claim more deductions than you usually would. It’s this lack of knowledge, or underestimation of what can be claimed, that can lead to an unfortunate reduction of your potential tax refund.
Expenses from self-education
Due to COVID, we’ve seen an influx of people undertaking additional study and training to upgrade or maximise their skillset. But something that those studying may not realise is that the expenses they’ve incurred while pursuing self-education may be tax deductible.
Expenses you can claim in relation to self-eduction can be broad. They can include course fees, travel expenses (including car parking), stationery, and the depreciation of necessary equipment, such as laptops or printers. However, these deductions are only available if the content of your studying relates to your current occupation. You cannot claim if your intention of undertaking education is to get a new job or by generating revenue by starting a new business.
There are also restrictions on the types of expenses you can claim, which make things a bit more complicated. When making a claim, the first $250 of self-education expenses can’t be used in your tax deduction – however, it may be possible to offset this reduction against other eligible types of deductions.
Owning and maintaining rental properties
If you own a rental property, you’re no doubt aware of the various expenses that come from it. There’s interest from negative gearing, property management fees, land tax, repairs and maintenance amongst many.
These expenses do play a role in completing your tax return, but it’s important to know what expenses can be claimed and it’s important to get this right, as it can substantially affect the final figure of your return.
COVID has also disrupted the living situations of many renters, which in turn has impacted the owners of these properties. If you’re in this situation, where one of your rental properties is now vacant, you may not be sure whether or not you can claim related expenses in your tax return. Deductions may still be possible, as long as the property is available for rent and efforts are being made to find new tenants.
Disposing of a property that has previously been a main residence
If you sell a property that has been your main residence, typically, you won’t be liable for capital gains tax. However, if this property was a main residence and also rented out during a specific period of time, things get a bit trickier.
Depending on the time this property was used a rental, this may affect the calculation of how much capital gains tax you’d have to pay. The rules for calculating the CGT is where things get a little less clear, and need to be worked through carefully.
How can you avoid these factors negatively affecting your tax return?
To avoid these factors from negatively affecting your tax return, the best solution is to use the services of a tax accountant. The team at Accountplan has dedicated professionals who can help process the more complex tax returns and make sure you get the best refund possible.
Source – EY