While the Government might be talking about simplifying, and even removing, individual tax returns in the future, this year’s return is longer and more complicated than ever.
Our top 10 tax tips for individuals are:
1. Know the allowable tax deductions for your occupation – the average amount claimed in personal tax returns for work related expenses in Australia is $1,920 per year. Find out what you are allowed to claim for your occupation and then keep the right records so that the Tax Office can’t disallow your claims.
The Personal Tax Specialists’ website lists specific tax deductions for over 30 occupations: https://personaltaxspecialists.com.au/what-deductions-can-you-claim.
In 2010 the Tax Office auditors are targeting Engineers, Mechanics and Teachers and anyone who makes large or unusual claims for their occupation, so make sure you have the right records to prove your claims before lodging your return.
2. No receipts are needed for items costing less than $10 – you don’t need to keep receipts when you buy items for work costing less than $10 to be able to make a claim on your tax return. You can claim up to $200 for these small expenses, provided you keep a diary record with the information that would normally be shown on a receipt (date, business name, item purchased, price).
3. Claim for internet, phone and pay TV use – most people would use one or more of these services during the year for their work. To be able to claim a deduction in your tax return you will need to keep receipts confirming how much you have paid and also keep a diary record to work out what proportion of the expense is work related.
Your diary should be kept for one month of the year and needs to identify how much of the service is used for work and personal use.
4. Claim for using your car for work – the simplest way to claim for car expenses is to estimate the number of kilometres you travel for work purposes during the year (you can claim up to a maximum of 5,000km per vehicle). Trips could relate to attending meetings, conferences or training courses, travelling to pick up supplies, equipment or tools, or travelling between job sites or office locations.
You will need to be able to show the Tax Office how you have calculated the number of kilometres you claim for, but you don’t need to keep any receipts for petrol, car repairs or other running costs.
5. Beware of using a line of credit or redraw facility – the Tax Office is looking closely at interest claimed by investors and rental property owners. Investors who have a redraw facility on their loan are particularly at risk. Banks often promote lines of credit as a simple way to save on interest, but you can get into trouble if you redraw money from your loan for personal (or non-investment related expenses). This redraw will be classed as a personal expense and, therefore, you can’t claim interest on that part of your loan.
Make sure any investment related loans are kept separate from personal loans and don’t use any redraw facility unless it is to pay for expenses that specifically relate to your investments.
6. Maximise your refund on children’s education expenses – here are a few tips to make sure you maximise your refund:
- You must receive FTB Part A for each child or they must receive Youth Allowance (or similar payment)
- There is no need to deduct the private use of an expense when claiming for education expenses, so if you purchase a new computer for your children and they use it for school work and for playing games or surfing the internet, you can claim 100% of the cost (unless you claim a tax deduction for any part of the cost, then that part can’t be included)
- Education expenses can be split between children to maximise your claim, provided all children have access to the item purchased
- Where a child goes from primary school to secondary school during a tax year, you are able to claim the maximum allowed for a secondary school student for the whole year
- If you spent more than the maximum allowed in the 2009 year, make sure you carry forward the excess to be used in this year’s return
- This year the maximum refund you can claim is $390 for each primary school child and $779 for each secondary school child.
7. Same sex couples finally treated as partners for tax – from this year, many couples (not just same sex couples) will have to show a lot more information about their spouse’s income in their tax returns. In addition to their taxable income, you may also need to provide details of any fringe benefits they receive, super contributions they have made, tax free government pensions they receive, losses from investments or rental properties and any child support payments they have made.
All of this information will be required to determine your ability to claim for certain offsets and to calculate your liability for some taxes (eg medicare levy surcharge) as well as work out if you are elibigle for the superannuation co-contribution.
8. Beware of E-Tax – the Tax Office is encouraging individuals to lodge their returns using E-Tax, but unless you really understand the tax system and know what you can claim then you will probably be worse off than if you use a Tax Agent to prepare your return for you. E-Tax won’t tell you if you have forgotten to claim for something or if you have filled in a box incorrectly and this could result in you being penalised if you are audited.
Even though you will have to pay a fee to your Tax Agent for lodging your tax return, their skill and knowledge can save you much more than it costs (in time, stress and in dollars).
9. Organise to salary sacrifice and reduce your tax each week – ask your employer to salary sacrifice some of your work expenses, overcoming the need to keep any receipts and giveing you more money in your pocket each week (rather than waiting until the end of the year to lodge your tax return).
Examples to salary sacrifice:
- Extra super contributions
- Laptop computers (one per year)
- Mobile phones or PDA’s
- Tools or work equipment
- Meals at work (breakfast, lunch, morning and afternoon tea, dinner – as long as it is provided at work and not at a restaurant or coffee shop)
When you salary sacrifice, your employer pays for the expense for you and deducts the GST exclusive cost from your gross pay. You pay less for the item (because your employer can claim back the GST) and the tax deducted from your pay is less.
10. Reduce your tax during the year – if you own a rental property, have other investments which are negatively geared or high work related expenses, you may want to apply for a tax variation which will reduce the amount of tax your employer has to deduct from your pay each week.
Rather than waiting until the end of the year to get a large tax refund, the tax variation will give you the benefit of extra cash each payday. In times of increasing interest rates, this can be a great option to make your investments or work expeneses more affordable.
For more information about any of these tips contact Personal Tax Specialists.
To make tax time a bit easier, Personal Tax Specialists provides clients with a personalised electronic ‘Tax Deduction Calculator’ to record all of their work expenses during the year. Rather than sorting through piles of receipts (or the dreaded shoebox) at tax time, they send in the calculator and their return can be completed quickly and painlessly.
As a special offer for July only, Personal Tax Specialists will send a free personalised ‘Tax Deduction Calculator’ to the first 50 people to email email@example.com. Don’t forget to mention your occupation and our top tax tips for 2010 to receive this special offer.