Kochie's Tax Return Tips
Tax return time is upon us again as group certificates make their way to inboxes across Australia. It’s time to sharpen your pencil to make sure you only pay the right amount to the tax man… and not a dollar more than required.
It’s a brand new financial year, and that means time to get your tax file in shape now, so you’re in the best possible position for next year in case you haven’t already.
Evaluate your tax position, work out what you can do to improve it and take action. Here are three steps to get prepared.
- Rustle up receipts
You want to claim all possible deductions to reduce that tax bill…but you need proof. Hunt down receipts for everything you’ve had to buy to do your job this year. If you work from home you can even claim some of your rent, internet connection and electricity bills.
- Fill any gaps
If you can’t find receipts but know where you spent the money, go back and see if they can provide a copy of the invoice. Bank and credit card statements showing details of purchases can be used in some cases.
- Gather group certificates
After June 30 you will start to receive group certificates, investment property accounts, and receipts for regular charity donations and your private health insurance. Add this to your tax file and fill in your return with ease.
Once that’s all done, take on board these four tips to save on your tax bill this year.
- Time income carefully
I usually say put off receiving income until July to delay paying the tax until the new financial year (now). This is a great strategy if you’re likely to earn less in 2012/13 and will therefore be on a lower marginal tax rate. If you’ll earn the same or more next financial year try to receive as much income as possible during the last month of the financial year.
If you’re in the uncomfortable position of receiving a termination payment then hopefully you brought it forward to the 2012 financial year if you were able. The rules that used to allow for a lower tax rate on termination payments and for you to roll the amount into your super ended on June 30. Similarly, rules on ‘golden handshakes’ are set to toughen next month so there’s a big incentive to bring these forward too.
However genuine redundancy payments may not qualify under the ‘transitional rules’ so check with an accountant.
- Offset capitals gains with losses
Half your profits from selling shares or investment properties will be charged capital gains tax at your marginal tax rate. Losses made on these kinds of investments can offset profits and cut your capital gains tax bill. So if you made a big profit on the sale of one investment last financial year, consider selling some of your disasters.
These approaches are sure to save you money come time to file your tax return, but to make certain here are four common deductions the average tax payer isn’t getting full value out of.
Charitable donations of $2 or more are tax deductible so rack your brain for when you were last bailed up outside the train station by a chatty charity girl and claim those contributions. If you’ve made an ongoing commitment to sponsoring a child overseas then this can add up to a pretty big deduction.
- Medical expenses
You can currently claim a deduction for 20% of out-of-pocket medical expenses over $2000 for you and your family. That includes everything from aged care facility fees to pharmaceuticals. From July 1 this will be means tested so getting on top of medical claims in this year’s return is especially important.
- The little things
Small ticket items are often forgotten come tax time. There’s no requirement to provide receipts for items costing under $10 and you can claim up to $200 a year for these small expenses. Write down the details of all the little things and get deducting.
- Work related expenses
Deductions for work related expenses have increased in recent years but there’s still a lot people are missing out on. For example airport lounge membership, briefcases, electronic organisers, conferences and cleaning of protective clothing and uniforms are all deductible to the extent they’re used for work purposes. Any costs you can think of that relate to your income earning activities are worth checking on the tax office checklist.
Some of these tips and tricks for minimising your tax return might seem a little arduous but are well worth the effort. It’s a lot of hard work earning your income so don’t let the tax office take any more than they’re entitled to by applying a little organisation and awareness this month.