This tax year is unique due to Covid 19, refunds will be more common and larger particularly for people who have lost their jobs or had their working hours reduced. The reason refunds are bigger is due to tax being withheld at a higher rate for the first six months of the year, however if income has since dropped, the tax withheld is likely to be too high.
Refunds are determined also by the eligible deductions you are claiming, it is important to see a qualified accountant to get the right advice to avoid a costly and stressful audit.
It is important to avoid doubling up on working from home deductions. From 1 March 2020, the ATO introduced a temporary short cut method to claim home office expenses. It is important that you don’t claim these expenses twice by using two separate methods. Working from home deductions still need substantiation through a diary or timesheet. The ATO can verify this information with your employer. Working from home expenses are complex, can you claim the value of a home desk you bought pre-Covid 19? What if you bought home office furniture secondhand? Do you need a dedicated work area to make a working from home claim? Do you need a separate study? Can you claim expenses like your mortgage, rent and council rates, what if you are a couple working from home together, do you need to split the invoices? Can you claim the cost of a uniform even if you are not using it, can you claim travel from your home office to your actual office? These questions can be answered by Best Business Practice.
Other areas that may bring about an audit include poor record keeping, not disclosing income, deductions on rentals, vacant land deductions, travel expenses and high interest claims just to name a few.
Beware there are big penalties for bogus or incorrect claims. If you are audited you will have to repay the tax and interest plus penalties and possibly face prosecution.
To receive the best refund and avoid an audit it is important to see an experienced CPA accountant. Your accountants fee is tax deductible….a win win situation. So don’t put yourself at risk by attempting to do your own tax this year, give Best Business Practice a call.