No one likes tax time, well maybe except accountants (they love that sort of thing), so I have decided to put together my top tax tips to help you get through tax time as painlessly as possible. Here goes:
(1) My number one golden rule when it comes to tax is that if the Taxman owes me money, (think refund), I get my tax done as quickly as possible. If it is likely that I owe the Taxman, for example I have made extra cash through saving or investments, I don’t submit my return until the 31st of October if I am doing it myself. If you use a tax agent, you can push it out even further. Most tax agents have an extension until the 31st of May, but confirm with your agent to be sure.
(2) Consider using the ATO’s online tax preparation and lodgement service called e-tax. It’s free and scarily enough, you can get a lot of your data prefilled in from the tax departments records. This means that for a lot of things such as your income from your employer, centrelink payments and bank interest, you just have to check that it is correct. It means that relatively simple returns are pretty easy to handle yourself and most refunds through e-tax are issued within 12 business days. Check out their website at http://www.ato.gov.au/Individuals/Lodging-your-tax-return/E-tax/ to decide whether it is for you.
(3) Make sure you are on top of what deductions you can claim. The ATO outlines specific deductions for many occupations including nurses, hairdressers, teachers and even “Adult industry workers” so check out the fact sheets at http://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Deductions-for-specific-industries-and-occupations/ and make sure you are not missing out on any deductions.
(4) The ATO considers electronic records to be just as valid as paper ones. This is true of both documents that were electronic to start with (for example receipts for online purchases) and documents which you have originally received in paper form. This means that you can now scan all your relevant paper receipts and throw away the original. Just make sure you also keep an additional electronic back up :-).
(5) Car usage is the biggest single deduction that you may be able to claim as an employee. Travel to work is generally not allowable, but you can claim the cost of using the private motor vehicle if it is being used for work purposes such as travel between work locations visiting clients/customers etc. If you want to make a claim the best way is to keep a log book to substantiate your claim.
(6) If you have a flexible employer who allows you to work from home you may be able to claim this through your tax. To cover expenses such as heating, cooling, lighting and depreciation of general office furniture, you can either claim your actual expenses (but you will need to keep a diary of those expenses and hours worked) or you can claim a fixed rate of 0.34c per hour worked. If you use the fixed rate, you will need to keep a diary to record the amount of time you use your home office for work purposes. Expenses such as stationary, telephone, internet and computers are claimed separately.
(7) Make sure that any investments or savings you have are in the name of the spouse paying the lowest tax rate. This is because dividends and interest are taxed at your marginal tax rate. Watch out for investments in the names of your children as they may attract punitive tax rates as explained in my previous post “Three things you really need to know when saving and investing for your child”
(8) Click here to see the latest marginal tax rates. You can now earn $18,200 before you have to start paying any tax.
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*Please note this is for your general information only and does not constitute financial or tax advice.