Today I would like to share my first-hand experience, in regards to some urban legends that go around among members of the community who simply want to get higher refunds.
First of all, “refunds” are not available for everyone. There has to be some tax paid or withheld during the year, so that we can receive something back. If there were no taxes paid in the first place, there would be no refund. Does that make sense?
Secondly, the refund is limited by the amount of tax paid or withheld during the year. If there was only $1,000.00 in taxes withheld from a taxpayer’s salaries, he or she cannot receive a single cent over that amount, even with a significant amount of work related expenses.
Thirdly, some accountants claim that they pay the taxpayer’s refund on the spot. That is a lie. The refund figures we calculate are always subject to ATO’s review and they are entitled to alter the amount, whether correct or not. But they have the last say about the refund amount the taxpayer is eligible to receive, if any. Naturally, this process takes time. So, the amount paid by the accountant to the taxpayer on the spot is just an estimate, paid from their own pocket for the sake of looking good.
The fourth most popular deduction item is travel expenses. People often think that they don’t have to substantiate the expense if the amount was paid by their employer as an allowance that appeared on their PAYG Payment Summaries. I understand that the legislation about “reasonable travel allowances” is very confusing. However, no one is entitled to deduct anything if they haven’t actually paid for it, regardless of the figure or of the allowance arrangement with their employer. Those reasonable allowance tables are guidelines for the employers, to help them calculate the figures to expense their employees’ business trips. The employees are still obliged to prove that they actually incurred those expenses. The best example is the accommodation expense. If the employee stays in a friend’s house, he/she cannot claim anything for accommodation, even if the employer has paid an allowance specifically for accommodation.
The last item I’d like to mention is about home office use. If you have a designated place of work for a paid job, or for your own business, then you cannot make a claim for home office occupancy expenses. You can still claim the utilities, cleaning, etc. for the place you occupy in your house to generate income, as they fall under the umbrella of running expenses; but you can’t claim anything more. The only exception to this rule is when the employer requires staff to work from home on certain days. I will talk more about that in next month’s article.
If you would like more information, please contact our office on 02 7200 2547.