On average, 25% of salaried individuals in Australia will find their tax refund is less than their expectation. There are plenty of reasons for this. The most important reasons for lower tax refunds are as below.
Working for 2 or more employers and claiming the Tax-Free Threshold with more than one employers
If you have worked for 2 or more employers at the same time, you are expected to claim the tax-free threshold with only one employer. In such a situation, you need to request one of the employers to deduct the PAYG withholding without claiming the tax-free threshold. For this, there is a separate form available, and you need to fill it out and submit it to your employer.
If this is not done by you, both of your employers may deduct the tax by claiming the tax-free threshold. This will result in a short deduction of tax on your regular payments during the year. As a result, the tax on taxable income for the year will be more than the tax deducted. Hence there may be less tax refund or tax payable at the end of the year.
Usually, you should claim the tax-free threshold on your highest income-earning job and submit the form with all other employers.
When you have other business income / rental income or any other income
When you have side income, may be Uber income, crypto trading income, rental income etc, and on that income, if you did not pay tax as a PAYG instalment, you are required to pay the total tax on that side income at the end of the year when filing the tax return. This will reduce your expected tax refund on salary income or it may create the tax payable position.
To avoid this, you need to calculate the tax on your side income at the end of each quarter and pay the same to ATO as PAYG instalment.
Eligible deductions not claimed
ATO has given a list of expenses you can claim against your salary income. If you have not claimed the eligible deductions then your tax refund may be less than last year. Or even if it is more than last year, it is still less than the amount of refund you are eligible.
Below is the major list of deductions available. You need to understand your eligibility to claim one or more of these deductions to achieve optimum tax outcomes.
- Car, transport and travel expenses
- Motor car expenses
- Taxi ride and public transport expenses
- Overnight travel expenses
- Tools, computers and items you use for work
- Tools and equipment to perform the work
- Mobile phone, internet
- Laptop and software
- Home phone and internet expenses
- Bags and cases for work
- Stationery and office supplier
- Office furniture and equipment
- Books and periodicals
- Clothes and items you wear at work
- Clothing, laundry and dry cleaning
- Glasses, contact lenses and protective glasses
- Watches
- Protective items
- Working from home expenses
- Education, training and seminars
- Self-education expenses
- Seminars conferences and training courses
- Memberships, accreditations, fees and commissions
- Union Fee, subscription to associations
- Professional membership
- Meals entertainment and functions
- Meals and snacks
- Overtime meal expenses
- Personal grooming, health and fitness
- Medical assessments, vaccinations
- Covid-19 test expenses
The basic conditions you need to fulfil to claim any work-related expenses are as follows.
- You must have incurred the expenses in the previous financial year
- These expenses should be directly related to your current employment
- You should not get any reimbursement from your employer for these expenses.
- You need to keep sufficient documentary evidence for the expenses as necessary.
ATO flags 3 key focus areas for this tax time. One of them is as below
- Incorrectly claiming work-related expenses
If you are unsure about your eligibility to claim any deduction or how to claim, please take the help of tax professionals.
Other deductions
- Gifts and Donations – Should be donated to deductible gift recipients
- Investments, Insurance and Super
- Income protection Insurance premiums
- Personal super contributions
- Cost of Managing tax affairs – tax agent fee and related expenses
- Negative gearing on rental property (For more details, refer to our Negative Gearing article).
Take the proper advice and claim the eligible deductions the proper way
