Although the end of financial year (EOFY) arrives at the same time every year, it still takes many of us by surprise.
Research from finder.com.au reveals that 31% of us are planning on putting our tax return towards our savings, which is promising.
It also makes it important that we do whatever we can to minimise how much of our hard earned dollars goes to the ATO (so more money will land in our own pockets).
Here are four money hacks for you to implement before the tax man pays a visit.
Claim all tax deductions you can
Tax deductions are expenses you make that can be deducted from your income, which means your taxable income will be smaller (so you’ll pay less tax!). If you spend money in the course of earning an income, you may be able to claim these expenses as a tax deduction. For example, if you spend time working from home, you may be able to claim the costs associated with your home office. This includes the cost of equipment, phone bills, repairs and cleaning.
Other tax deductions include study expenses, the cost of travelling for work and donations of $2 or more to a charity registered as a deductible gift recipient. Remember, to claim these you must keep records of your expenses in case the ATO asks you for proof, so make sure you keep your receipts handy!
Make a contribution to your super
Contributing to your super will reduce your taxable income and therefore the amount of tax you pay. All salary sacrifices made to your super account are taxed at the lower rate of 15%. This reduced tax rate aims to encourage us to contribute to our super and save for our retirement. The ATO does place limits on how much you can contribute to your superannuation so check its website and have a chat to your accountant before making any contributions.
Your regular taxable income can be taxed up to 45% depending on how much you earn. Contributing to your super means this income will be taxed at a much lower rate, minimising how much the taxman gets his hands on.
Get some professional advice
While we can lodge our own tax return online, this can be a challenging and time consuming experience. To give yourself some peace of mind that your tax return is being lodged correctly, you might want to hire an accountant. Make sure they are registered with the Tax Practitioners Board so you know they hold the required qualifications and to help avoid duds who might try to rip you off. Employing the professional expertise of an accountant who understands Australia’s taxation laws will ensure your tax bill is as small as it can be. Don’t forget that you can even claim the cost of your accountant as a tax deduction next financial year!
This year, your tax return must be lodged before Tuesday 31 October 2018. Make sure you contact your accountant well before this date so they have enough time to claim all tax deductions and to avoid any penalties and interest charges from the ATO.
Make a new financial year’s resolution
As the new financial year begins, now is the best time to set new goals. If (like many of us) you spent this EOFY frantically doing paperwork and collecting receipts at the eleventh hour, you’ll now understand the importance of being organised. Spend some time creating an online filing system where you can keep track of all your income and expenses – and maintain it throughout the year. This will also make it easier for your accountant to take stock of your finances when doing your next tax return. Remember that the less time your accountant spends on your tax, the less you will pay them.
It’s also important to keep track of all receipts as the ATO may ask for evidence of your transactions. For example, hold onto your pay slips, bank statements and receipts from work-related expenses. Even if you think a purchase you make can’t be claimed as a deduction – keep the receipt just in case!
A little organisation can make a big difference to your stress levels this EOFY. Follow these four money hacks and you will be better prepared for the joys of tax time!