How to get an extra $237 in your tax refund

The 3.3 million taxpayers who self-lodge using the ATO's myTax service could be losing out on a valuable tax refund.

A recent review of self-lodged tax returns from last year by H&R Block found that 39% of returns had missed out on deductions and as a result they were entitled to claim additional refunds averaging $237.44 each. Extrapolated over the whole self-lodging population, that's $300 million in unclaimed tax.

A further 20% of respondents made mistakes in the other direction, over-claiming deductions or under-reporting income.

They had underpaid the ATO by an average of $800 each, leaving themselves exposed to a tax audit, penalties and interest (plus payment of the underpaid tax of course). Over two thirds of respondents told H&R Block they believed they could claim things that would actually be illegal!

The reason for all those errors can be put down to a simple lack of knowledge about the often complex tax rules.

Clearly the potential to get it wrong is enormous, either through missing out on valid claims or incorrectly claiming items you're not entitled to. So here's a few do's and don'ts to bear in mind when completing your tax return.

What you can claim

You're entitled to claim a deduction for any expense which you incurred in earning your income. So, if you have incurred a work-related expense, and you have the paperwork to prove it, don't hesitate to claim it. Here are a few items - some you might know about and others you don't - that might well be claimable.

Bags

It's long been accepted that the cost of a briefcase for work can be tax deductible (and if you haven't claimed that, you should!) but the same principle also applies to ladies handbags. A bit of care needs to be taken there - the cost needs to be appropriate to the bag's function as a workplace item, so you might struggle to claim the cost of that Gucci bag that set you back thousands of dollars.

If your job heavily involves travel (for instance a fly-in fly-out worker at a mine site or a flight attendant), you could also claim the cost of luggage.

Clothing

Tax deductions around clothing can be a minefield. You can claim the cost of compulsory uniforms and also safety clothing that you need for your job. That could include sunglasses and sun-cream if you work outside, work boots, hi-vis jackets or winter clothing if you work in a cold climate.

You can't claim a tax deduction for non-compulsory uniforms. If you work in a clothes shop for instance and you're obliged to wear the clothes sold by that shop, you can't claim a deduction.

Home office costs

If you work from home, you may be able to claim a portion of your utility bills, as well as part of your home internet, home phone and mobile bills.

Costs of tools and other equipment

Whether it's the cost of tools if you are a tradie, or the cost of a new computer, laptop or mobile phone if you are office-based, if you spend it, you can claim it, provided it's used for work purposes (if it's used partly for work and partly for private use, you can only claim the work-related proportion). Items costing $300 or less are deducible in full, immediately. Items costing more than $300 are deductible over several years.

Union membership

If you're a member of a trade union or any other form of professional association, don't forget to claim the fee or membership subscription.

Costs of using your own car for work

This doesn't include driving to and from work but it does include visiting clients or suppliers, and driving from one work-site to another.

Costs of travelling for work

If you are required to work away from home, and you incur costs on meals and accommodation, those costs are deductible up to the amount you actually spent. If your employer pays you an allowance to cover your traveling costs, that allowance is taxable.

What you can't claim

A good tax accountant will be able to tell you exactly what you can and can't claim, minimising the chances of an audit at a later date.

Make-up

Is it really possible to claim make-up as a tax deduction? Sadly, usually not. But if you're a performance artist (such as an actor or musician), a make-up artist or a member of a flight crew) you can make a claim.

Child care

You can't claim child care costs. That's important to note because 25% of our survey respondents thought you could!

A good tax accountant will be able to tell you exactly what you can and can't claim, minimising the chances of an audit at a later date.

What you might miss

Income from the share-economy

About 50% of our survey respondents didn't realise that income earned from the sharing economy (such as driving for Uber, doing odd-jobs through Airtasker or renting a room through Airbnb) is taxable. Not only is it taxable but the ATO has a strong focus on non-compliance in this area and has even obtained details of who is operating through those companies direct from the sharing economy services themselves. So, if you're one of the growing number of Australians who are earning extra income from the sharing economy, make sure you declare it on your tax return or you're likely to run into trouble with the ATO.

By contrast, about 10% of survey respondents thought that gambling winnings are taxable. The good news is that they are not. So, if you win big on the Melbourne Cup, the taxman doesn't need to know about it.

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