As a financial planner, one of the most common phrase I hear is “I wish I’d know that sooner.” With good advice, planning and forethought, it doesn’t take much to get into a better position financially, and the sooner you get started, the better!
With the end of financial year looming, now is a good time to get set up so that you’re ready to lodge your tax return and claim maximum allowable deductions.
Here’s five things you can to that will make the whole process easier:
- Know what you can and what you can’t claim
The ATO has announced that they’ll be cracking down on “other work-related deductions”, so don’t try to slip a few dodgy expenses through. Have a chat with your accountant so that you’re clear on what’s claimable. It will make the process a whole lot easier for both of you!
- Separate business from pleasure
If you haven’t already done it, it’s time to open a separate bank account for work related expenses so that you don’t have to wade through your personal account looking for them. It’s the easiest and most cost effective way to keep the divide neat and manageable. You can have your personal and business accounts linked on the same card and just call one your savings account and one your cheque account.
Remember you need to have written evidence that you spent the money, what you spent it on, who the supplier was and when the purchase occurred and that the expense had a direct connection with deriving your assessable income. Bank or credit card statements usually won’t contain all the information you need to keep on record. Tip 3 can help you here!
- Use apps to make life easier
The ATO’s myDeductions app helps you save and store accurate information about your deductions throughout the income year – ensuring no expenses slip between the cracks. The information can then be provided directly to your tax agent or uploaded directly to myTax, which you can access through myGov.
- Salary sacrificing
Once you’ve identified and collated the written evidence for work-related deductions, refer to ASIC’s MoneySmart website to see if there are any expenses on the list that your employer might consider allowing you to salary sacrifice. Salary sacrificing is generally a tax-effective option that helps you save on tax by allowing you to forego your salary in return for non-cash benefits. In doing so it reduces your taxable income, which reduces the amount of income tax you pay. Expenses and items that can typically be salary sacrificed include computers, car parking, childcare, superannuation contributions and some insurance premiums. Note: Check any implications regarding fringe benefits tax as your employer may pass them on to you.
- Spend now if you’re going to have a tax bill
If you know you’re going to get a tax bill and you have legitimate, deductible expenses that you can pay this financial year instead of next, pay them now. This could include things like interest or maintenance on an investment property, a new vehicle or other equipment purchases or insurance premiums. Refer to point 1 and make sure you know what’s deductible – or ask your accountant for clarification.
Please note that Australian tax law is complex and varies depending on your individual circumstances, so to make informed decisions always seek tax advice from a registered tax advisor.
If we can support you to achieve your financial goals, please get in touch. Whatever stage you’re at with your financial planning, it’s good to be organised.
All the best
0414 412 731