It’s soon to be the end of yet another financial year. The flurry of EoFY sales and Christmas toy laybuys and the hysteria caused by those on the look-out to get a ‘good deal.’
It’s a chaotic time of year for everyone and myself (as an accountant) included. With this heightened stress however, there are some small things that you can do in the next few weeks that will ensure you are best placed to get a top tax return and join the masses on their spending spree.
The ATO criteria and definition of a tax deduction is: It must be spent and it must be necessarily incurred in earning your income.
Having a good accountant or tax agent is important as they can easily identify all the deductions available to you as an individual and for your specific industry of employment. However, regardless of what field you work in there are some generic deductions that the majority of tax payers are entitled to, so if you haven’t done any tax planning this year or left everything to the last minute be sure to read on.
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Here are the top last minute tax tips to help you get a better tax return.
Donations to registered charities
Including sponsorship for things like MS read-a-thon, Movember etc, as long as you haven’t received anything in return for your donation, such as raffle tickets or novelty items. This also includes donations to flood relief/ disaster relief.
Action: Go through your email receipts and files, find all donations and make a pile to include in your tax return.
Charged on any investment accounts or interest payments on funds borrowed to purchase investment assets (however you must remember that the interest/dividends earned on these accounts/assets is also assessable income and needs to be reported as well).
Action: In internet banking, most banks will provide an end of financial year summary for accounts. Grab the fees, charges and interest – print out and take with you to your accountant (or when doing your own tax refund)
Management fees paid to a financial planner
Provided the advice relates to income producing assets. For example you might be considering a self-managed super fund or investing in a managed fund or deciding whether to buy/sell shares.
Action: Print the invoice or bill they supplied you. Include in your files for this years tax return.
The cost of income protection
Or sickness and accident insurance premiums. This type of insurance covers you if you hurt yourself or become sick and you are unable to work. It will pay you your normal wage until you are fit to return to work.
Action: Request a summary from your insurer that itemises your income protection from your other forms of life insurance. It is completely tax deductable and an easy way to boost your tax refund.
Your tax agent fees
(The amount you pay to your accountant/ tax agent to prepare your tax return each year). You would claim the fees paid for last year’s tax return this year.
Action: Request an invoice or dig it up from last years records.
The cost of travelling to see your tax agent
You can also claim the cost of travelling to see your accountant to have your tax return prepared. You should keep a record of the number of kilometres you travel and any other incidental costs such as parking, meals, accommodation (if applicable).
Action: Do some rough sums, how much does it cost you? Take these sums and tell your accountant, they will then assess the validity of them and include in your tax return.
Work related expenses
You don’t need a receipt for items costing less than $10 to be able to make a claim on your tax return. You can claim up to $200 for these small expenses, provided you keep a diary record with the information that would normally be shown on a receipt (date, business name, item purchased, price) and $300 in total with substation. This type of deduction covers the cost of buying and repairing equipment and supplies you use at work, including tools, electronic organisers, stationery, diary, work bag, tool belt or briefcase and mobile phones.
Action: Get a manilla folder and print out all invoices, receipts and expenses. Make a list of items you bought that you didn’t keep receipts for so you know your $200 threshold claimability.
The cost of any annual association membership fees or union fees
So long as they are related to your employment or field of work.
Action: Obtain invoice from Union or assosiation. They have to provide it to you so simply call the accounts clerks to request.
Parking, tolls, taxis and public transport
If you are required to travel to attend seminars, meetings or training courses (if you need to stay away overnight you can also claim for the cost of all meals and your accommodation). If you use your own vehicle for this travel you should keep a diary record of the dates and kilometres travelled. If this is regular travel for work, your accountant can advise the best method for claiming this type of expense as a deduction.
Action: If you haven’t done the above, start your diary for this coming financial year. This way you have maximum claimability come the following years tax return. It really does add up so start today.
Work-related short training courses
For example first aid, OH&S, bookkeeping, RSA & RSG, computer skills or management, which are not run by a University or TAFE or paid for by your employer (you can also claim for the cost of travelling to and from the course and any accommodation and meal expenses if you are required to stay away overnight).
Action: Find the receipts or ask you employer for the invoices if they deducted it from your salary.
The purchase of compulsory uniforms
Including shirts, ties, pants, skirts, jackets, jumpers, etc. The uniform should have the business’s logo on it to ensure it is tax deductible. You can also claim the cost of laundry or dry cleaning of the work specific uniforms.
Any protective equipment
Required for working at your business premises, including gloves, goggles, masks, steel-capped boots, gum boots, sun protection items, winter outdoor jackets and aprons. This is only relevant if the protective items are required to be worn by your employer, due to potential dangers in your work environment.
Action: Read more about tax deductions for tradies for a full list of items that you can deduct from your tax.
The cost of work-related magazines, journals or books
These could include occupational specific titles or computer, management or OH&S books or if you are in retail they could be books relating to the type of products that you sell.
Action: Get your receipts together. Every purchase of a book or similar that was for helping you make money or invest, tax deduct it right away.
The cost of work-related mobile or home telephone calls and line rental
If you keep a diary record of the number of phone calls you make for work for one month then you can use that to estimate your usage for the whole year, or alternatively pull out your phone bills and start highlighting now.
Action: See below.
The cost of work-related internet connection fees
You can only claim the proportion of your monthly fees that relate to work use, which could include emailing or research relating to your job
Action: See below.
The cost of maintaining a home office
If you are required to complete work at home (you should keep a diary to record how many hours per week you spend working from your home office)
Action: Things like electricity, internet, home phone – get all of these bills and total them up for the time you have been using your office. Talk with your accountant about how to ascertain just how much of that cost was actually part of running the home office, it might add up to more than you think and helps reduce tax.
Other things you can do now to ensure a good tax return;
Check your thresholds
Where does your income sit in relation to private health insurance & rebates, the net medical expenses rebate? You can get a statement of your out of pocket medical expenses at any point during the financial year from Medicare either online or at the shopfront. If you are close to a threshold, these next few days might be the time to have that procedure you’ve delayed all year.
Is there anything that you can pre-pay?
When it comes to personal taxation, the tax office operates on a cash accounting system whereby you can claim a deduction in the year you spend it (not the year that it relates to as in accrual accounting). So if you have things like income protection insurance premiums due in the next financial, and you intend to earn less next financial year (for example taking maternity leave) then it makes sense to claim the deduction in the year that you will receive the most benefit from it.
Every individual taxpayer is required to lodge their return before October 31 each year, but tax professionals are generally given more time to lodge, which can be a handy extension to a payment deadline. However you will need to register with one (if you haven’t previously) in order to take advantage of the extension. Of course, if you’re sure you are going to get a refund, there is no point in delaying lodgment. In these cases, it is worth getting all your information together and lodged as soon as possible post 1 July.
In the coming days before the end of June
Collect your receipts or contact companies for missing paperwork. Once you have them together, it will give you a clearer idea of what’s missing or if there is still room to make new purchases this financial year. Also give your car log book a check and make sure your entries are up to date.
Today is also the day you should buy yourself a good calculator for adding up all those receipts. Finally, if you’ve been slack with the preparation this financial year, 1 July is the best time of year to start tax planning for 2013-14, so set yourself up with a pen and paper, start labeling some folders and start working out your purchases and investments for the financial year ahead.