With tax time looming, now is the time to think about lodging your annual tax return.
Over the coming months, 13 million Australians will be lodge a return. About 84% of them will get a refund, and with the average size of refunds last year exceeding $2,500 for taxpayers lodging through myTax and over $3,450 for those who use tax agents, it pays to spend a little time and effort ensuring you’ve got every detail of your return right.
So what are my top tips that you can do between now and tax time for maximising your return this year?
The Golden Rules of Tax Deductions
If you want to make a claim for work-related expenses, you need to follow the three golden rules:
The expense must relate to your work
You mustn’t have been reimbursed by your employer
You must be able to prove that you spent the money. That means that you must keep receipts, invoices or statements to demonstrate that you actually incurred the expense.
H&R Block’s tip is to keep electronic copies of all documentation relating to expenses. Paper receipts get lost or fade, so keeping everything together on your phone or computer will save time and effort when you come to complete your tax return.
Get Help
There’s a reason why nearly 70% of people use a tax agent to help them do their taxes. Tax is complicated and stressful and if you do it yourself, you’re likely to make a mistake. You might claim something you weren’t entitled to and find yourself audited by the ATO or you might miss out on a deduction you could have claimed but didn’t realise was available to you; the result is a lower refund than you could have got.
Using a tax agent like H&R Block takes away the stress and opens up a whole world of expertise to guide you through the process, so you can be sure you’re claiming everything you’re entitled to. Get expert advice and the fee will generally be more than covered by the bigger refund, and the peace of mind.
Running your own business?
If so, look to utilise temporary full expensing. This allows you to claim an immediate tax deduction for the entire costs of all capital purchases, rather than depreciating the cost over several years, as used to happen.
This is great for tech items such as computers, tablets and phones, as well as tools and equipment for tradies, office furniture and even motor vehicles.
As the temporary full expensing scheme ends on 30 June, this is the last chance to claim this very
generous tax break!
Remember, as well as making a purchase, the asset you acquire also has to be used or available for use in your business by 30 June. If you order and pay for an asset between now and 30 June but it isn’t actually delivered until July, you’ll miss out!
Charitable donations
Make a last minute charitable donation. You can claim a deduction for donations of more than $2 to a registered charity provided you have a receipt for the donation.
Prepay some expenses
You can claim a tax deduction this year for expenses which wholly or partly relate to next year. So, if you have some spare cash, consider paying things like union fees, professional subscriptions and annual insurance premiums by the end of the financial year in order to accelerate the deduction.
Make a tax deductible super contribution
If you have some spare cash, look at making a personal contribution into your super fund. Provided the total amount of your contributions (including the contributions made on your behalf by your employer) does not exceed $27,500, this can be a great way to boost your retirement savings and claim a tax deduction for the personal contribution. The payment must be in your super fund’s bank account by June 30th (which means that the payment probably needs to be made from your bank account almost immediately to give it time to clear) and you need to advise your super fund that you’ve made the payment by the time you’ve lodge your tax return (your super fund or accountant can give you guidance on how to complete the form and there’s a standard form on the ATO website here: https://www.ato.gov.au/forms/notice-of-intent-to-claim-or-vary-a-deduction-for-personal-super-contributions/)
Offset capital gains against capital losses
If you’ve disposed of shares or any other form of investment and you know you’ve made a capital gain, take a look at your investment portfolio and consider disposing of any assets which you own which you know are sitting at a loss. The resulting capital losses can be offset against the capital gain.
Be careful though if you sell shares sitting at a loss and then buy them back in the new tax year. The ATO takes a hard line against so-called “wash sales”. This refers to the sale of an asset before the year end and the purchase of a substantially identical asset immediately after the year end. The ATO regard the purchase and the sale as effectively the same asset and have issued a Tax Ruling which states that they can apply the anti-avoidance provisions to cancel any tax benefits and apply penalties.