Like the rest of the nation, nurses and midwives will be looking to complete their tax returns at the end of the 2021-22 Financial Year.
However, what can nurses and midwives do to make sure they are the making the most of the forthcoming period, particularly with extra expenses due to COVID.
The ANMJ spoke to Mark Chapman, the Director of Tax Communications for H&R Block Australia, about how readers can ensure that their 2021-22 tax returns are maximised.
ANMJ: What are some common mistakes nurses and midwives make when completing their annual tax returns?
Mark Chapman (MC): Don’t embellish deductions: You can only claim what you’ve spent. So, don’t inflate deductions to get a bigger refund and only claim for costs you can prove you spent by producing an invoice, receipt or bank statement.
If your deduction claims are found to be incorrect, you will be required to repay the tax avoided, plus pay interest. If the ATO believes you have acted carelessly, a penalty between 25% and 95% of the tax avoided may also be charged.
Don’t rely on pre-filled data from the ATO: These days, with the push of a button, you can pre-fill lots of your income information straight from the ATO’s systems. Take care though and don’t assume that income data is correct or complete. If you are lodging early, always use your own information as the critical source of data.
Some people assume that it must be right because the data comes from the ATO. That’s a dangerous assumption, especially in July and early August. If you omit income and get questioned by the ATO, the legal burden will be on you, even though you’ve taken the information straight from the ATO’s pre-filled data.
ANMJ: What sort of details should readers be looking to consolidate ahead of the end of the financial year?
MC: Now is a good time to gather together all the evidence you’ll need to complete your tax return; you’ll need all the evidence of your income (payslips, dividend statements, etc.), and crucially, you’ll need all the evidence of what you’ve spent and intend to claim.
The golden rule is that you can’t claim unless you prove you spent the money (and that your employer didn’t reimburse you). So, make sure you keep all relevant receipts, invoices, bank statements and credit card statements. If you’re unsure if you can make a claim, keep the receipt anyway and discuss it with your tax agent.
ANMJ: How can COVID expenses, such as Rapid Antigen Tests, be claimed as a deduction?
The government announced that it is making COVID-19 tests tax-deductible for Australian individuals when purchased for work-related purposes. This legislation will be backdated to apply for the 2021-22 income year (from 1 July 2021).
But did you know they are probably already deductible?
Under the existing general deduction provisions, an individual may qualify for a tax deduction for the cost of a COVID-19 test (either PCR or RAT) where they are taken for work-related purposes, eg. where there is a mandatory requirement under an employer’s COVID-19 mandate.
Certain countries and states may also require a COVID-19 test for an employee to enter that territory or return to their home state. This is tax-deductible, where the test is required for a work-related trip.
RAT kits purchased by individuals for private purposes (eg. personal travel, convenience, no access to PCR testing) will not be tax-deductible, either under existing law or under the government’s proposals.
Remember to keep all receipts relating to COVID-19 testing and take them with you when you get your tax return prepared, together with substantiation that shows the test was for work-related purposes.
ANMJ: What things should people who work in multiple nursing roles need to consider when completing their returns?
If you’ve got a few concurrent jobs, your tax can get a little confusing.
Even if the taxpayer and employers do the right thing as determined by the ATO’s PAYG tax rates, problems can occur for two-income earners. The problem arises because your first job will attract the tax-free threshold while your second job (and subsequent incomes) is taxed according to the progressive tax rates outlined by the ATO.
Things can get messy if you don’t know how to report all your income (for example, if you choose to claim the tax free threshold for both jobs!), leaving you with a large tax payable figure at the year end.
ANMJ: Was there anything from the recent Federal Budget that nurses and midwives should be mindful of when completing their tax returns?
The main feature of the Federal Budget for individuals was the increase in the low and middle-income tax offset. People earning up to $126,000 will get a rebate of $420 above what they would have got anyway through the existing tax offset.
To get it, all you have to do is lodge a tax return for 2021-22 – so funds should start to flow to taxpayers from 1 July 2022.
If your taxable income is up to $126,000, you will get some or all of the expanded low and middle-income tax offset. Basically, if your income is less than $37,000, you will pay $675 less tax. If your income is between $37,001 and $48,000, the tax offset will increase steadily to $1,500.
Between $48,000 and $90,000, you will pay $1,500 less tax (the maximum). Earn more than $90,000, and the offset gradually phases out, disappearing after $126,000. So, if you earn $126,000, you will pay $420 less tax, but if you earn $126,001, you won’t benefit from the offset.
Those looking to know more about how to make the most of the forthcoming tax return period are encouraged to get in touch with their accountant or tax consultant.
