Maximising Your Refund

For anyone who has lodged a tax return before, whether DIY or through an agent, you know that the best way to maximise your tax refund is to claim as many deductions as possible. And in order to claim a deduction, you need 2 things - Substantiation and Nexus to the income earning activity (unless there is an exemption under a tax ruling, for example, donations or tax return fees).

Nexus - a fancy way of saying “related to” - involves proving that the expense was incurred in order to produce the income. For example, you might earn $500 interest in a savings account which had bank fees of $60. The bank fees are directly related to the interest income.

Sometimes nexus is obvious or implied, such as a trade person’s tools or laundry of work-provided uniform. Other times it needs to be proven, such as using your car or mobile phone for work-related purposes. In cases where you need to prove the nexus, the ATO accepts an employment contract or letter from your employer, outlining how the use of your car, mobile phone, home office, computer etc, is required in order for you to perform your work duties.

Once you can establish the nexus, then you need to get substantiation.

Substantiation - “evidence” that you incurred the expense - can be tricky because people generally don’t keep receipts in boxes, and most individuals do not have bookkeeping skills (and let’s face it, unless you ARE a bookkeeper, who has time to learn?), so keeping track of your receipts can be a difficult undertaking. But it really doesn’t have to be.

There are some really great apps available online, for free, which can help you to keep track of your expenses, store your receipts, and log your kms on your car.

You can also keep track of your receipts by taking a photo with your phone and emailing it to yourself. If you are a business owner, there is cloud-based accounting software available which syncs to compatible apps on your phone that capture all the data in receipts. You could also email PDFs directly to the software provider and it will assist you to create bills. My recommendation is Xero, which gives you various tools to keep track of your expenses.

Try to pay for things with cards as often as possible, and where applicable, have the receipt emailed to you directly from the supplier.

However you choose to keep your receipts, make sure it is digitally recorded somewhere, and backed up! If you can’t prove it, you most likely can’t claim it.