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Tax tips for end of financial year 2022

Feature | 30 May 2022

It’s tax time again. In Australia, all Australian adults are required to lodge an income tax return or at least advise the Australian Taxation Office that a return is not necessary. The ATO is the regulatory body that manages this.

To assist you with tax time for FY2022, we’ve pulled together all you need to know about tax tips, including what you can claim as tax deductions depending on your taxable income, any tax obligations you need to be aware of and what, if any items you can claim as a tax deduction for the last financial year.

Important: This is not professional tax advice and you should always consult a registered tax agent for professional advice related to your taxable income, tax deduction and tax returns.

Your taxable income

The end of the financial year in Australia is 30 June each year, meaning this income tax year is based on the dates from 1 July 2021 – 30 June 2022.

The deadline to lodge your tax return will be 31st October 2022.

The ATO has upped its technology game, and now receives various information regarding your employment, bank accounts, shares & other investments, such as crypto or rental property, throughout the year. The ATO then ‘prefills’ these items on your income tax return to work out your tax deduction.

There are some basic items required to lodge your income tax return and in our tax tips article, we’ll take you through some of them, including:

  • Payment Summary (PAYG) – your employer will send this on your behalf to the ATO;
  • Interest – Your bank should send you a receipt, but it will also show on the ATO’s prefilling record;
  • Your spouse’s income;
  • Expenses (deductions) relating to generating your income.

Your PAYG payment summary

A PAYG Payment summary is your annual summary of income earned from an employer for the financial year. This was previously known as your group certificate.

The Federal Government changed our individual tax rates in 2020 including the marginal tax rate. These are reflected below:

2022 income tax table – live from 1 July 2021

Taxable Income Income Tax

$0 to $18,200

Nil
$18,201 to $45,000 19c for each $1 over $18,200
$45,001 to $120,000 $5,092 plus 32.5c for each $1 over $45,000
$120,001 to $180,000 $29,467 plus 37c for each $1 over $120,000
$180,001 and over

$51,667 plus 45c for each $1 over $180,000

Preparing a tax return

Work-related expenses & tax deductions

One of the most asked questions when discussing taxes in Australia is “what can I claim?” when it comes to tax time and my tax deductions.

A claim or tax deductions are expenses incurred that assist the generating of your income. This includes:

  • Receipts for work-related common expenses;
  • Receipts for donations;
  • Income protection insurances;
  • Accountants invoice/receipt from last year.

As we continue through the COVID-19 pandemic, the ATO has assisted employees who work from home but find it difficult to calculate their working from home claims (WFH) when it comes to tax deductions. This is further explained below.

How much tax will I have to pay on my tax return? Will I get a refund?

When people talk about tax time, the question always gets to “how much did you get back?”

Everyone’s tax situation will have slight variances that have a big impact on the refund in the end. Many things will affect the amount of income and subsequently the amount of taxes payable or refundable – this might include but is not limited to credits, low-income offsets, rental properties, cryptocurrencies, deductions and even Capital gains tax (CGT) which is the tax you pay on profits from selling assets such as property.

Working our your taxable income – a worked example

We want to walk you through a practical example of working out your assessable income and tax refunds on a home tax deduction.

Example: Lisa earned $150,000 in the 2022 financial year as an employee. Her PAYG payment summary contains wages of $150,000 and taxes withheld of $45,000.

Lisa worked from home due to COVID and had some expenses related to working from home. She wants to use the shortcut method to calculate her deductions, which totalled $1,108. She had no other deductions in 2022.

Income $150,000
Deductions $1,108
Net income $148,892

Man using calculator

How to work out tax payable

Tax on first $120,000 $29,467.00
Tax on income for $148,892 – $120,000 at 37c per dollar $10,690.04
Tax on income earned $40,157.04
Medicare levy $2,977.84
Total payable $43,134.88
Tax paid 2022 $45,000.00
Tax payable (refundable) ($1,865.12)

Based on the above, Lisa will receive a tax refund of $1,865.12 from her 2022 income tax return.

Working out your working from home deduction – a guide from the Australian Taxation Office

This is taken from the ATO website, from the context of an individual who has spent money on working from home:

  • you must have spent the money;
  • the expense must directly relate to earning your income;
  • you must have a record to prove it.

This means you can’t claim a deduction for:

  • items your employer provides (employer contributions);
  • expenses where you have been reimbursed for them.

If you work from home, you are able to claim a deduction for the additional running expenses you incur from your work and/or small business. These include:

  • electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work;
  • cleaning costs for a dedicated work area;
  • phone and internet expenses;
  • computer consumables (for example, printer paper and ink) and stationery;
  • home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the
    • the full cost of items up to $300;
    • the decline in value (depreciation) for items over $300.

As this can get quite complicated, the ATO introduced a shortcut method. These items are ordinarily claimed at item D5 of your income tax return.

Working out a tax return

From the worked example, Lisa claimed $1,108 from working from home using the shortcut method (fixed rate). She worked at home for seven (7) months of the year. She claimed her MATE internet for seven months and almost seven months (22 days per month) of WFH.

Lisa claims:

  1. Her MATE internet plan (best mates 50/20) for seven months | $69 per month x 7 = $483.00;
  2. 150 days x 8 hours x $0.52 = $621.00.

Total claim = $1,108.00.

Biggest Tip

The biggest recommendation we can provide is to keep good records. Yes, it is a bit boring, but also satisfying to have records compiled come the end of the year (and easy if we keep good budgets!).

The easiest way to do this is to get a simple app that allows you to log expenses, and then use your mobile phone to take photos of receipts to add to the expenses. We all have a smartphone and they all have cameras. Use these to save yourself time and money!


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