With the end of the financial year just around the corner, an accounting expert has compiled a list of secret ways you can save money on your tax return.
James Solomons, head of accounting at Xero, said small business owners in Australia could potentially claim dogs, sunscreen and handbags as tax-deductible expenses.
‘If you have a dog that safeguards your small-business site, you can claim food, vet bills and the cost of buying the animal,’ Mr Solomons told news.com.au.
Small business owners who use their own dogs for work, such as guard or cattle dogs, can claim veterinarian and food bills, along with the price of buying the pet.
Mr Solomons said taxpayers could claim a handbag in their expenses, as long as its primary use was for work and its price tag reflected the owner’s business revenue.
‘Claiming a $3000 Prada on yearly turnover of $100,000 might look unreasonable. But a $200 handbag should be fine,’ he said.
‘On the other hand, if your revenue is $2 million a year, that Prada may well be justifiable.’
In order to be eligible to claim a handbag as a work expense, taxpayers need to prove the bag was used for carrying more than just personal items, possibly by keeping a logbook.
Mr Solomons said taxpayers who were required to work outside as part of their job were entitled to claim expenses for sunscreen and makeup with an SPF factor.
The Tax Office also allows Australians to claim for sunglasses deductions when a worker is exposed to the sun.
But he warned about the dangers of claiming exorbitant amounts of money on a pair of sunglasses for working purposes.
‘If you go and try to claim a $400 pair of Prada sunglasses, but you’re a plumber, you’re going to get a few questions asked,’ he told Daily Mail Australia.
Mr Solomons said education and training were both tax deductible, as were portions of your electricity, gas and water bills if you run your business from your home.
‘If you travel to remote locations to work for extended periods, you may be able to claim the costs of a caravan or Winnebago,’ he added.
ATO tax return tips
The Australian Taxation Office has compiled a list of tax deductions you can claim for work-related expenses. They include:
Vehicle and travel (including travel between work and home)
Clothing, laundry and dry-cleaning
Gifts and donations
Home office expenses
Interest, dividend and other investment income deductions
Tools and equipment
Small business owners who perform any part of their work duties from home can claim a number of items, including computers, printers, printer ink, desks, chairs and stationery.
If you use part of your home as an office space, you may be entitled to a deduction for the costs of running it.
‘If you are an employee and required to use your computer, phone or other electronic device for work purposes, you may be able to claim a deduction for your costs,’ according to the ATO.
While there are some bizarre deductions that can be claimed, the ATO urges tax payers to remember three golden rules when lodging their returns.
‘One, make sure you spent the money yourself and were not reimbursed,’ ATO Assistant Commissioner Graham Whyte said.
‘Two, make sure it’s related to your job and three, you need a record to prove it.’
Finance expert’s DOs and DON’Ts
DO: Speak to an accountant before filing your tax return.
DO: Keep receipts for everything you buy that has a direct connection to your employment. Without receipts you are not entitled to claim any deductions.
DO: Use an online service to auto-scan your receipts and keep digital copies.
DO: Check online to see what work-related expenses your specific industry is entitled to.
DON’T: Think you can claim something because your colleague claimed it.
DON’T: Think you can get away with not including all aspects of your income, including making money on investments. The ATO has sophisticated data capable of detecting dodgy tax returns.