Tax Tips #1 – 2017

 

# 1 KEEP ACCURATE RECORDS

Do you come to the end of each tax year dreading the time it’s going to take to get your records together to lodge your return? Well, with a little bit of planning that can all change and now is the best time to start.

Whether you are an employee or self-employed, you need accurate records of your income and tax-deductible expenses for the financial year and simply retaining hard copies of receipts in a shoe box can prove to be a dangerous game. Imagine the horror when you go to dig out all your receipts for the accountant at the end of the year to find that some are completely blank . . . . oops, the ink just isn’t what it used to be!!

So, what records do you need to keep? All your income and allowable expenses relating to earning that income can be claimed. Let’s look at these now.

Income source includes your employment, government benefits you may have received, investment returns and business profits. It also includes any other income you may have earned throughout the year such as certain insurance proceeds, foreign income or shares you have received as part of an employee share plan.

If you are an employee, you will be provided with a payment summary (group certificate) after the end of the financial year (June 30). If you are running your own business, you will need to have your financial books to determine the net profit (or loss) of your business for the financial year.

When it comes to expenses, these are generally expenses you have incurred that are directly related to the earning of your income and can include:

  • Vehicle and travel expenses
  • Clothing, laundry and dry-cleaning expenses
  • Gifts and donations
  • Home office expenses
  • Interest, dividend and investment expense deductions
  • Self-education expenses
  • Tools and equipment

These expenses are generally deductible against your income which then reduces the tax you must pay. The best way of storing this information is electronically (ensuring you backup all your files regularly). Depending on your personal preference you could use folders on you home computer to do this or an app on your mobile phone. There are so many great apps out there but perhaps two of the more popular ones would be One Note or Evernote. There is an app that can be used with Evernote called Receipts by Tidal Pool Software that is worth a look. If using your home computer, I’d suggest creating a folder for the tax year and then sub-folders for the different categories outlined above. You can then start scanning and storing to your heart’s content.

I keep a pencil-case in my bag that I pop receipts into. Each month I then scan them all at once and file them. For you, it may mean scanning once a quarter, it really depends on how many expenses you may have. I promise you this, it will save you so much time and stress in the long run.

Happy EOFY – Tips

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With only 18 days to go until the end of the financial year there is still time to reduce your tax liability but you will have to act quickly. Here are a couple of strategies that could help to either reduce the tax you need to pay or maximise your savings:

Pre-pay your Income Protection Insurance

Did you know that if you pre-pay your income protection insurance before the end of the financial year you can claim the entire premium in this year’s tax return? It’s true, and if you need some extra deductions this year because of a higher than usual income this could be a great way of reducing your tax liability. On top of the tax deduction you will also be saving money by paying your premiums annually as insurers also offer discounts for annual premiums.

Claim a personal tax deduction for superannuation

If you are self employed or earning less than 10% of your total assessable income plus reportable fringe benefits and reportable employer superannuation contributions from employment you may be able to claim a tax deduction for all or part of your personal contributions to superannuation. This can be a great way to build your retirement savings while also reducing your taxable income. There are yearly age based limits on how much you can contribute which are $25,000 if you are 59 and under and $35,000 if you are over 60 years of age. You will also need to let your superfund know that you intend to claim a deduction before June 30 so please check with your accountant, tax agent, or financial adviser to ensure that the appropriate notice has been lodged and check if you meet all the conditions.

Spouse superannuation contributions

You may consider making a contribution to your spouses superannuation. If you do you may be entitled to a maximum tax offset of up to $540 for the financial year. There are various conditions that must be met in order to claim the deduction with the full deduction available on assessable incomes of $10,800 or less reducing to nothing at an assessable income of $13,800. This makes it a great strategy for those with a partner on a low income.

Co-Contributions

Have you heard of this one before? If you earn less than $48,516 in this financial year this is something to seriously consider as the Government is giving money away which doesn’t happen very often. I bet your dying to hear how this works . . . quite simply if you earn $33,516 or less this financial year, the government will contribute into your superannuation fund (tax free), $0.50 for every dollar that you contribute to super up to a maximum $500. So, if you contribute $1,000 into super before the end of the financial year the government will contribute $500. If you contribute $300 the government will contribute $150. That’s money for jam!!

For incomes above $33,516 the rate of contribution will decrease until it cuts out at $48,516. There is a great calculator you can use on the Money Smart website https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/super-co-contribution-calculator  to determine how much co-contribution you are entitled to, give it a go.

Happy EOFY!!

 

Tammy

 

The information provided is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an adviser.

 

Happy EOFY – Tips for property investors before its too late!!

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Wowsa!! Can you believe that it is the end of financial year in just 18 day? How time flies . . . . if you are a property investor you still have time to make the most of a clever strategy to reduce your tax bill this year. Want to know more? Please read on . . . .
Have you ever heard of interest in advance? It’s a strategy that allows you to pre-pay the next year’s interest on your investment loans in advance. That’s right in advance!! It is only available on fixed rate investment loans and the conditions of these loans do vary between different lenders but it is a strategy worth considering.
There are several reasons why paying interest in advance can be a benefit for investors. The main reason is usually to gain tax benefits. It works by paying the interest that will be accrued in the following financial year (FY2014/2015) in the current financial year (FY2013/2014) and offsetting it against income earned in the current financial year (FY2013/2014). By why would you do it? Well, if an investor’s income was unusually high during the financial year or if a lower income is expected in the next financial year tis could be a good reason in order to maximise your tax deduction.
Lenders will also often incentivise clients to pay interest in advance by offering them a discount which results in less interest being paid overall. For investors looking to simplify their finances, by paying interest in advance, especially on an interest only loan, they can eliminate the need for periodic payments throughout the year. In terms of budgeting, paying interest in advance means that investors can enjoy a discounted fixed rate for the whole year, regardless of rises or falls in interest rates.
The interest in advance option is available to both new and existing investment loan clients. If you are considering it for yourself please consult a financial adviser to make sure that it suits your individual requirements.
Another way you can reduce your tax liability is to bring forward expenditure to before 30 June, if you are planning on repairs on your investment property. Care should be taken in determining whether a maintenance or repair is deductible or if it is considered a renovation or of a capital nature. Please consult a tax agent to make sure the work you are planning is deductible.