Being tax smart might be simpler than you think

Tax time usually divides us into two categories of people.

Are you the person that understands their tax entitlements down the last cent, and plans throughout the year accordingly? So that when it’s time to file your tax return, you have no doubt that you’ve maximised every benefit available to you?

Or are you more of a fly by the seat of your pants kind of person? Mostly ignoring the concept of tax throughout the year, and then hoping it will ‘sort itself out’ at tax time. Usually this leads to the dawning realisation that you’ve wasted another year-full of opportunities to reduce your tax bill.

If you’re in the second category, you’ll know that every year the time crunch means that you often don’t fully understand your entitlements, and even if you do you – don’t take time to action them.

When it comes to tax, preparation really is the key to success. Here are 10 essential tax tips, that will reduce stress (and increase your refund), come June 30.

1. Be organised! Throughout the year, ensure that you are collecting and collating records for any claimable expenses from your pay as you go – income, investment income, or self-employed income.
2. Ensure that you have all credit or loan statements for the financial year, as well as back account statements.
3. Your field of work may have a specific set of allowable deductions, that you may not realise you are entitled to. Visit the ATO website to get more information about job-specific deductions, and ensure that you have receipts or documentation to support these claims.
4. Purchasing claimable items prior to June 30, can result in a reduction in your assessable income. If you take this approach, ensure that all claimable items are paid in full prior to the end of the financial year. Note: items purchased on a credit card, but not reconciled until the new financial year, will not be claimable for the current year.
5. If possible, prior to June 30, prepay interest on borrowings – so that it can be claimed in the current financial year.
6. There are a number of allowable deductions available to investors (including self-managed super fund trustees) on the assets that they hold. Ensure that you have comprehensive documentation, and consult the ATO website for detailed information on allowable deductions for investment purchases.
7. According to InvestSMART, “SMSF trustees and other individuals have an opportunity to contribute concessionally taxed superannuation this financial year. But make sure the money is cleared into your account before July 1.
8. Ensure that all assets have comprehensive (and separate) records, including any related expenses and any income received.
9. According to InvestSMART, “Crystallising investment losses before June 30 to offset capital gains can be a prudent strategy. If assets need to be realised to achieve this aim, make sure the sale transaction is settled before June 30”. They do warn against selling assets to claim a loss in the current financial year, only to buy them back shortly afterwards – as this can be considered ‘tax avoidance’.
10. Get into see your financial advisor early. They’ll be able to check in on your tax planning – this means you’ll also have time to action any outstanding items before tax time.

Source: IWG