These simple record keeping tricks can put extra money into your tax refund
The ATO’s current crackdown on tax deductions means that good record keeping is more important than ever. The ATO has thousands of staff and their job is to collect taxes and catch people who can’t prove their deduction claims. They are getting serious about this.
On top of that, if you simply forget about things you paid for – what a waste. That’s lost money. (Or, perhaps you could say it’s a personal donation to the ATO’s revenue.)
Australians lose millions in unclaimed tax deductions every year. Don’t let this be you.
A basic habit for keeping your receipts through the year is EASY.
Plus, at tax time, if any claim is questioned by the ATO, with properly saved receipts, you will be 100% ready and in the clear.
Simple up to date records mean that you can claim ALL the tax deductions you’re entitled to so you’ll never pay too much tax!
But that’s not all… A clear outline of your income and expenses is the first thing you’ll need to supply if you need financial advice, purchase a property, refinance or increase insurances. Good record keeping doesn’t just make tax time easier, it also keeps many other areas of your life in manageable order.
So when it comes to record keeping, what do you actually need?
The following is an extensive list and for most people only a few items will apply to you, so don’t be daunted. However, ensure you’re familiar with all the different types of tax deductible expenses so you know what records to keep for these expenses if you have them in the future.
First of all, you’ll need a record of all the INCOME you received during the year, including:
- Managed funds
- Rent from rental properties
- Income from letting a room
Note: Your employer, real estate agent or managed fund should provide you with an annual statement which summarises your earnings over the past financial year.
Next, you’ll need a record of all your tax deductible expenses. This is where you bump up your tax refund:
1. General expenses
- Tax agent fees including tax return preparation
- Income Protection costs
- Charity Donations
- Private health cover (your private health fund will send you an annual statement, or you can ring and ask them, or check at their website if you have a login.)
2. General work related expenses
- Professional membership fees
- License/certificate fees
- Union Fees
3. Education expense
- Course fees including text books
- Related travel costs
- Accommodation and meals when required to stay away from home
- Professional libraries and work related magazines
4. Work related equipment purchase or lease
- Calculators and electronic organisers
- Computer related consumables
- Computers and laptops
- Ipad & similar small electronic equipment
- Phone, mobile and phone accessories
- Briefcases and carry-bags
- Safety equipment – e.g. sunscreens, hard hats, harnesses, safety glasses
- Sunglasses (if you work outside)
- Technical instruments
- Tools of your trade
Note: For purchases over $300 you will need to claim a deduction for their decline in value (formerly known as depreciation) over a longer period rather than claiming the purchase price in full on your next return.
5. Work related travel
- Personal car or vehicle costs (See our blog on how to keep record to Claim tax deductions for car use)
- Parking Fees
- Public transport fares
- General travel expenses, including flights, taxis etc.
- Accommodation and meals (if working away from home overnight)
6. Home office expense
- Desks chairs and other office furnishings
- Office equipment
- Home Office running costs (electricity, internet usage)
7. Clothing purchase and maintenance
- Protective clothing
- Uniforms (with logo)
- Laundry of work uniform and protective clothing
8. Newly acquired asset costs eg. a rental property
9. Expenses records for rental properties or other investments
- See our blog on 27 Valuable Rental Property Tax Deductions
10. Records of recently disposed or sold assets
11. Expense records related to any disability aids, attendant care or aged care
How long should I keep tax receipts?
The ATO suggest that you keep your records for 5 years if you:
- Claimed a deduction for decline in value (formerly called depreciation)
- you need to keep the records of these for five years after the date of your last claim for decline in value.
- Acquire or dispose of an asset
- you should keep this documentation until five years after no capital gains tax (CGT) is required – you will need this information to work out a capital gain or loss.
- Are in dispute with the ATO
- you should keep these records for five years from the date the dispute is finalised.
For most other tax payers who have simple tax affairs, you should keep records for at least two years.
If you save your receipts in your Etax account, they’ll always be there for you and you can get rid of the paper copies. Using Etax on a mobile, click the “attach” button to snap a photo of your receipt, then it’s saved and ready for your tax return.
Good habits for tax record keeping
Here are our ‘must do’ record keeping habits for tax returns:
Keep all your tax deductible expense records in logical order (newest to oldest). Then, at tax time you won’t find yourself frantically rummaging through mountains of receipts and paperwork. In addition, you won’t lose any receipts and miss out on tax deductions.
Tip: Use colour coded files for each type of expense so putting new receipts in the right place is quick and easy.
Create a list of tax deductions
Keep a list of all your expenses and a running total of each type. You will need to know the total amounts of each type of expense at tax time so be sure to do this regularly.
Back up your receipts
It’s a good idea to scan or photograph each receipt or supporting document as soon as you receive it so you have an electronic back up of each one. This achieves three important things;
- It preserves receipts that may fade,
- Ensures you have a copy in case something happens to the original, and
- Electronic copies allow you to quickly attach files to your tax return, saving you lots of time in July or August.
You can log into your Etax account anytime – on mobile – and save your receipts in a couple of clicks. Just log in, click the attach button, and your mobile will let you upload a photo of your receipt. Easy!
Always keep proof of tax-deductible expenses
Make sure you always get a receipt for any expense you think you might be able to claim as a tax deduction. Remember, you can’t claim a tax deduction unless you have proof of purchase. If you don’t get a receipt for a payment at the time, follow up with the supplier until you get it.