I wrote last week about tax avoidance and tax evasion and their associated penalties, but there are other ways to reduce your tax payable that are totally legitimate. Whether you are doing your own tax return or using a tax agent, you might want to consider the following:
Maximise your deductions: basically, almost anything that you pay in order to earn your income may be deductible, and you might be surprised at some of the things that you can include as a tax deduction. There are a variety of deductible items for individuals listed on the ATO website, take some time to consider if any apply to you. You will also be rewarded for taking the time to think very carefully about your expenses throughout the year, as many smaller items can be easily forgotten. Charitable donations and work related expenses can often be put into the ‘it’s only a few dollars, what’s the point?’ category, but over the course of a year they can add up. If you have a rental property, maintenance expenses are deductible, as is interest on the loan as well as travel to and from the property if it is specifically related to your duties as a landlord.
Keep the records: many of the allowable deductions require records as proof, so keep your receipts, and spend some time going through them. If you didn’t keep receipts, you can at least go through bank and credit card statements for proof of purchase. This will likely turn up a few expenses that you had forgotten about, so you will benefit on two fronts. If you use online banking you can easily bring up transaction records, otherwise you should have received statements in the mail or you can contact your bank for the required documents.
Ask an expert: while most tax returns are relatively straightforward, you may miss out on potentially large deductions if you choose to do your return yourself. For a simple tax return, your tax agent is unlikely to charge much more than a hundred and twenty dollars, which you will almost certainly make back (and possibly much more) on less obvious deductions.
I recently detailed some tax minimisation activities that you can do prior to the EOFY, but even if you don’t get those organised, the action items above should allow you to get the most out of your tax return this year!
By Jennifer Lowe