If you somehow missed the countless end of financial year sales flooding your inbox, June 30 marks the end of the financial year. But what does this time of year even mean beyond half-price air fryers and aggressive Cotton On deals? (Image source: Kelly Sikkema).
By Jordan White | @JordanBWhite1
June 30 marked the end of the financial year when tax returns are due. Though not officially due until October, many Australians are rushing to complete their returns, which are $2600 on average according to Finder.
With 19 per cent of Australians knowing “little to nothing” about tax and young people’s knowledge in this area being considered low according to ATO research, this time of year can be daunting for university students.
How on earth do even I submit a tax return? What does the end of financial year mean beyond treating oneself to unnecessary purchases?
We’ve got these questions (and many others) covered in our guide on tax time for students.
What is end of financial year, anyway?
EOFY – end of financial year – marks the 12-month period from July 1 to June 30 the following year when tax and business expenses are reported in Australia.
From July 1 until October 31, you can submit your tax return – an online form available via MyGov – to the Australian Taxation Office (ATO). The ATO will use this information to calculate how much tax you owe, and whether you’ve paid enough or too much.
Do I need to submit a tax return?
Generally, yes. Anyone who pays tax, earns above $18,200 (the tax-free threshold) and/or receives a superannuation contribution from their employer needs to complete a tax return.
Most Centrelink payments like Youth Allowance, Austudy, and JobSeeker are taxable. If you’ve earnt above $18,200 while receiving these payments, you need to lodge a return.
Still unsure? You can use the ATO’s ‘Do I need to lodge a return’ tool to determine whether you need to lodge a return.
Where and how do I submit a tax return?
You’ll need a MyGov account linked to the ATO. Once you’ve signed up and entered your Tax File Number (TFN), you will be prompted to complete your tax return.
To help you complete your return, the ATO imports “pre-fill” information from your employer and financial institutions like banks and health funds. Pre-fill data is usually ready by late July so it can be worth waiting to complete your return.
Once pre-fill information is available, you can input income, expenses, capital gains or losses, and other information.
How do deductions work? What can I claim?
Deductions are certain expenses you have incurred throughout the financial year and can be used to reduce your taxable income. They can include work related expenses, investment expenses, gifts and donations, or paying someone to do your tax return.
Deductions claimed are minused from your assessable income (your income before any credits or debits). For instance, earning $30,000 but making $300 in deductions brings your assessable income down to $29,700.
You do not need written evidence for deductions under $300 though you still need to be able to show working out to prove the deduction is reasonable.
The ATO has an industry-specific list of common deductions but here are a few common work-related expenses.
Any work-related driving claims need to be unpaid, meaning this is not something your employer already pays you for. You can claim 72 cents per kilometre in the 2020-21 financial year.
Deductions can be made for driving required to perform work duties outside of your regular place of employment, delivering or collecting supplies, attending work-related meetings away from your usual work, and being sent to an alternative place of work (like another store).
Though you can’t claim driving to and from your home to your job each day, you can claim for driving between two workplaces if you work more than one job.
Working from home:
If you worked from home during COVID, you could claim a proportion of heating, cooling and lighting; work-related internet and mobile use; stationery and computer consumables; office equipment and depreciations in the value of any equipment.
The ATO introduced an 80 cent per hour “shortcut” for claiming work from home expenses last year. Under this method, you can claim a flat 80 cents per hour to cover all these expenses instead of calculating percentages. This method will no longer be usable next financial year.
University and/or self-education expenses:
Self-education expenses need to align with your current field of work, maintain or improve your knowledge and skills, and result in (or be likely to) an increased income.
If you meet these requirements, expenses like textbooks, stationery, study equipment, student service/union fees, and postage are deductible.
A percentage of software subscriptions like Microsoft Office and Creative Cloud are also deductible if they meet this criteria.
To claim any of these expenses for a uni degree, there needs to be a clear correlation between your field of work and degree. For example, a law student working as a paralegal may be eligible for some claims.
Clothing and laundry
Occupation-specific, protective clothing, and work uniforms are work expenses if they are required at your job. Work uniforms need to be compulsory and not “generic” like black jeans.
Cleaning and maintaining work clothing is also deductible. Laundry can be claimed at $1 per load if the cycle only contained work clothing or 50 cents for cycles of casual and work clothing.
How does my HECS-HELP loan impact my tax return?
The short answer is that this repayment generally doesn’t impact your tax return, though there are a few things worth keeping in mind.
HECS-HELP – the eye-watering cost of your university fees the government loans to you – is payable if you earned above $47,014 in the 2020-21 financial year.
Earning above this threshold means at least 1 per cent of your income is payable towards your HECS debt. The maximum repayment rate is 10 per cent for those earning above $143,753.
If you hit the threshold in a pay cycle (i.e. a week), your HECS repayment should be withheld by your employer and given to the ATO. Earning below the threshold by tax time means this amount will be returned to you.
It is important to make sure you have declared you have a payable HECS debt on your tax file declaration though. If you started working with your current employer before university, it might be worth updating your tax declaration.
Notably, the “repayment income” is different to taxable income. Repayment income is taxable income plus other incomes like reportable superannuation contributions.
So, if your taxable income is $43,000 but your employer paid $4085 (the compulsory 9.5 per cent) in super contributions atop of this, your repayment income becomes $47,180. This is worth remembering so you don’t unexpectedly pass the threshold.
What is the Medicare levy?
The Medicare levy is a 2 per cent fee that helps fund Australia’s public health system. It is payable in addition to any tax paid and generally required unless you meet certain exemptions.
The Medicare levy surcharge is an additional fee for those earning above $90,000.
Should I pay someone to do my tax return?
It depends on your situation.
Tax services usually cost around $60 an hour but might be able to “boost” your return. This cost can be claimed as a deduction for managing your tax affairs next financial year.
If your tax return is more complicated (i.e., you held shares and other taxable assets), paying someone else might be a good option.
But if your tax return is relatively simple, learning how to complete it yourself can be a rewarding experience and save you some money. You’ve read this far, haven’t you?
UniSA students can access a free tax help service through USASA. Trained “Tax Help” volunteers assist with lodging tax returns for those earning under $60,000.
How can I make doing my taxes easier next year?
It is always a good idea to keep receipts for deductions. You can keep these in a folder or download the ATO’s MyDeductions app which records all your deductions in one place.
Any advice in this article is general in nature and does not constitute personal financial advice. Please seek professional advice tailored to your individual circumstances before acting on any information in this article.