It takes a rare soul to get excited about tax season. But if you play your receipts right; your next snow weekender might just pay for itself. Not only that, but you could shift yourself into a different tax bracket entirely. How? Read on.
Renew Your Playboy Subscription
It sounds too good to be true, but if you have spare EOFY cash, consider paying for certain items now (from magazine subscriptions to the interest on your investment property) that you’ll use next financial year. “You can claim a tax deduction this year for expenses which wholly or partly relate to next year,” explains Mark Chapman, Director of Tax Communications at H&R Block.
An often overlooked way of doing this is making a personal contribution into your super fund. Provided the total amount of your contributions (including the contributions made on your behalf by your employer) does not exceed $25,000, this can be a great way to simultaneously boost your nest egg and claim a tax deduction.
Develop A Messiah Complex
Yes: you may have spent the last 51 weeks of the year avoiding eye contact with do-gooders wanting your signature in the street, but now is the perfect time to rediscover your latent Mother Teresa. The question isn’t: would you rather someone in need got your money or the ATO. It’s: would you rather you got your money (back) or the ATO. Right?
Remember: there’s no limit to how much you can donate and claim back—as long as you have the receipts to prove it. Just make sure you don’t claim for donations that could give you some form of benefit (e.g. raffle tickets or tickets to a charity dinner).
Quit While You’re Ahead
Sold an investment property and made a few (million) bucks? Consider looking at investments you have sitting at a loss and selling those off too, because the resulting capital losses can be offset against the capital gain.
Invest In Your Business
If you’re an entrepreneur or small business owner with an aggregate turnover of less than $20 million, you can buy something worth up to $20,000 for your company and immediately write it off against your business tax bill. New technology, stationary, furniture, a time share in a Ferrari—as long as you can justify it, the market’s your oyster.
Sacrifice Your Salary
If you use your mobile phone, tablet or laptop predominately for work (provided your employer allows you to), you can opt to “salary sacrifice” these items once a year (upgrading your equipment so you are using the latest technology).
Doing this means you are buying these items with your pre-tax income (you’ll be taxed less), and if your employer is registered for GST you should also get the benefits of GST on the items. Doing this saves you tax and means your employer doesn’t have to pay a ‘fringe benefits’ tax (on the basis that the items are mainly used for work purposes) and you’ll save on the GST (if your employer is registered for GST).
According to Fernando Prieto, a CA at Solid Partners Accountants & Advisors, “There is some administration behind this and implementing it usually depends on your employers agreeing to it and making sure you meet all the requirements. But if you meet the requirements it’s a great way to fund the purchase of some technology you’ve been holding off on, or switching to a sim only plan and improving your cashflow.”
A Word Of Warning
Fernando also told us, “This year the ATO is paying particular attention to work related clothing deductions and work related car expenses.” Which means you need to carefully consider whether you are eligible to claim the work related clothing deduction and car expenses (referring to your occupation specific guide—on the ATO website). A common mistake, he says is people claiming suits that don’t have a company logo.
“Suits for office workers aren’t deductible unless they have a company logo, so you can’t claim dry cleaning etc. – even if you are expected to wear a suit as part of your occupation.”
You also need to, “Make sure you keep the correct records/substantiation requirements for those claims (i.e. if you claim a proportion of your mobile expenses, you have to calculate your business call percentage for one month’s phone bill in that financial year).”
The application of deductions varies greatly between occupations, so the easiest way to maximise your deductions is to look at the guidance the ATO provides for specific occupations and determine if any of those deductions apply to you.
Even if your occupation isn’t specifically listed, according to Fernando, “You should be able to find an occupation that is very similar to yours and then use it as a guide (i.e. if there’s no guidance for accountants, you could refer to the business professionals guide).”
There are 30+ guides, and the important things to do are; get familiar with what you can (and can’t) claim specific to your occupation, keep the correct records and claim the correct amount.
Disclaimer: The information provided below is general in nature and should not be relied upon by individual tax payers – as it does not take into consideration your specific circumstances. We are not responsible for the tax man’s rage when he finds out you enjoyed an article at his expense.