This tax season, Health Professionals Bank have a little something to get you through the tax return season.
The guide was prepared by Health Professionals Bank, working closely with the Australian Tax Office, to create the most relevant information around tax deductions for nurses and midwives.
Ah, tax time. For many of us, it’s likely a love-hate relationship that brings with it equal parts joy in getting a refund and dislike for having to complete your return. Tax time doesn’t have to be overwhelming and can actually be quite an easy process if you have everything organised and have a good understanding of what you need to do ahead of time.
Here are our tips for making the most of tax time this year.
1. Know what you can claim
Knowing what, and how much you can claim can make all of the difference to your tax return. Generally speaking, you can claim a work-related deduction if:
- you spent the money yourself and you weren’t reimbursed for it;
- it’s directly related to earning your income; and
- you have a record to prove it to the Australian Tax Office (ATO).
There are a number of work-related expenses nurses and midwives can claim including:
- The cost of buying, hiring, mending, cleaning or ironing clothing that is protective, occupation specific, or considered a uniform that you are required to wear such non-slip shoes or a shirt with your employer’s logo on it
- Commission payments made to a nursing agency
- Renewing your annual practising certificate
- Car expenses if you drive between two separate jobs in one day, or need to travel to a different location for the same employer
- Self-education expenses directly related to your current job
You can find a full list of deductible expenses on the ATO’s website. Additionally, any charitable donations over $2 are tax deductible.
2. Keep accurate records
One of the most important things you can do to make tax time easier is to keep accurate records of your expenses during the year. You should keep track of any work-related expenses that you weren’t reimbursed for throughout the year to make sure you’re able to claim everything that you’re entitled to.
Record keeping once meant a shoebox or folder full of slightly faded and crumpled receipts, but there are now plenty of apps and other digital means of storing these documents.
Apps such as Expensify and Smart Receipts can help you organise and track of all of your receipts. The MyDeductions app from the ATO goes one step further and can email your data to your accountant or pre-fill your tax return through MyTax based on the information you input during the year.
If you don’t like the idea of using an app, take pictures of your receipts with your smartphone or tablet and create a folder on your device to keep everything together.
Without receipts, you can only claim a maximum of $300 in work-related expenses – with some exceptions – and this number might be lower depending on the category of expense you’re claiming. Be wary about claiming the maximum amount without receipts as this could send up a red flag on your return and delay your refund.
3. Take advantage of incentives and entitlements
There are other ways to reduce the amount of income tax you need to pay besides work-related expense deductions. Find out if your employer offers novated leasing or other salary package options which can reduce how much income tax is taken out of each pay.
Salary packaging allows you to exchange a portion of your salary for non-cash benefits. The value of your salary package is deducted from your pre-tax income, reducing your Pay-As-You-Go tax liability. Depending on what your employer offers, you might be able to package recreational and leisure activities and memberships, car parking costs or other entertainment expenses.
A novated lease is a specific type of salary packaging that bundles repayments on your car and general running costs such as fuel, maintenance and insurance through your employer. Your employer makes the repayments to the financier and then takes the cost of the payment out of your pre-tax income.
Selling any loss-incurring investments such as shares can also help to reduce the amount of tax you’ll owe at the end of the financial year.
4. Work with a registered tax agent
The MyTax portal on the ATO website is a simple and effective tool for self-filing basic tax returns and can manage the most common deductions and tax offsets. MyTax is free and most of the information you’ll need, such as income from your employer and interest earned from your bank, will be pre-filled by early August.
If you have a more complex situation, or just want the peace of mind knowing that you’ve done everything right, you can work with a registered tax agent to complete and lodge your return. Working with a tax agent also means you may be able to lodge your return after the usual 31 October deadline which can take some of the pressure off if you need additional time to get your documents together.
As a bonus, the fee you pay to the tax agent can be claimed on the following year’s return.
5. Put your refund to good use
The average tax refund is $2,574, which is a decent amount of money to receive all at once. So, what’s the best way to make the most of your refund? It’s worth taking the time to work out where your refund will have the most impact. Take a look at your short and long term financial goals to determine what’s most important.
If you want to meet your short term goals more quickly, consider paying down debts like a credit card or personal loan or boosting your holiday savings or emergency fund. If you’re focused more on the longer term, put it towards a house deposit, make an extra repayment on your mortgage, contribute to your super or add it to your savings.
If you have any questions or concerns about what’s right for your situation, a financial planner or accountant can help you make decisions to maximise your refund at tax time.
This information is not to be taken as taxation advice. You should consult a tax advisor for all tax-related matters.
Get sorted for tax time