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Last Minute Tax Tips for Individuals
As an individual, you can ‘spring clean’ your tax. There are a lot of suggestions below which could save you paying tax that you should not be paying.
Are there any expenses you can prepay?
A good example of pre-paying expenses is income protection. If you are paying a monthly premium you can prepay the rest of the premium and claim a tax deduction for your full years premium. The key is to pay these expenses before the 30th of June. Other examples of expenses are: Interest on investment loans, rental property repairs and expenses like Investment property insurances, memberships and subscription and rates- if it is an investment property. However, you may want to check your contracts to ensure that there are no terms and clauses which prevent you from making extra payments (like with a fixed loan for example).
On the topic of income protection, we cannot stress enough the need to make sure you protect your family, lifestyle and personal situation. Not only do you get the peace of mind if something should happen, you are protected financially. You may also be entitled to a tax deduction.
Outdoor Workers- Are you forgetting something?
Do you work outdoors? If you are a plumber, electrician, gardener or builder, you are probably very aware you can claim safety gear. We have recently noticed a number of outdoor workers not claiming the less obvious items and missing out on valuable deductions.
For people who work in an outdoor environment most of the time, you can also claim items such as sunscreen, hats and sunglasses. Please keep receipts for these items if you wish to claim them as a tax deduction.
Don’t have a receipt? No problem, refer to the article here which explains the ATO’s position on how to claim these items without a receipt.
What is your retirement strategy? Regardless of what it is, superannuation is a tax effective vehicle to assist your retirement strategy.
For everyone the concessional tax deductible superannuation threshold is $25,000. Which means you can sacrifice more into super, assist in your retirement and save on tax.
Other expenses that can be salary sacrificed.
This may be an opportunity to review contractual agreements with employers before 30th June because an individual cannot make a salary sacrifice arrangement for income already earned. Other things that can be salary sacrificed include motor vehicle expenses and school fees.
Have you changed cars? Did you do more business travel than normal over the last 3 months? These are really important questions to determine the amount you are claiming on your car. It is important not to assume the expense and kilometres would be the same when you change cars even if it is the same model and make of car.
What is your method of claiming car expenses?
There are two methods of claiming your car expenses.
Charity- Is it time to give?
Have you been putting off giving because you haven’t had time or not sure what charity to give to? A deduction to a registered charity over $2 is claimable. If you are unsure of what to claim or what organisation to give to, we have strategic alliances and are always happy to provide guidance. If you need more help regarding giving to a charity, make an appointment here.
Capital Gains Tax (CGT)
Before the year ends, you should review the gains and losses within your investments before the financial year-end. This will give you an opportunity to balance and realise capital losses versus any capital gains. If possible, you should consider deferring the realisation of your capital gains after June 30.
Are you selling an asset?
We had a client who needed advice on Capital Gains Tax. She owned two houses. She was unaware which house should be sold and asked for our advice. We can help with a strategy to minimise your capital gains exposure and take advantage of any concessions applicable to you.
Some General Comments Regarding Tax Planning
How are you filing your proof of purchases?
Ensure you have a good filing system in place. A really good way to track your expenses is to have electronic files. Paper receipts can fade or get lost or tear. If you have a smart phone or a scanner take a photo of the receipt and then name and file the photo or scanned image for easy access. A good idea would be to sort the images on an online service like Dropbox or iCloud so they can’t get lost or destroyed.
Are you paying the right debt off first?
If you are unsure, it may be worth a quick phone call to us. In simple terms it is better to pay off your loans that have no tax implications. That is, loans used to purchase personal items not for investment/ business purposes like furniture and holidays.
Are you getting the right interest rate?
It may be time to review your interest rates. In principle, you should be getting the lowest rate on items that aren’t tax deductible and minimise non-deductible interest. If you are unsure the rate you are getting is the best, don’t hesitate to call us and we can refer you to one of our mortgage brokers.
Have you got a quantity surveyor to value the assets you are looking to depreciate?
We recently had an experience where a client had used a quantity surveyor which was cheaper to value their investment property. As a result, the client missed out on higher depreciation/ write offs not only for the year but also every year after that!
Where this is concerned, look for overall value. We were told recently by one of the companies that a good test to determine if you are missing out on valuable deductions is to look at the value of your hot water service. If the value they put on the report is less than $1,300 it is likely you are not being tax efficient. Give us a call if you are unsure.
If you have never used a quantity surveyor before, now is the time to act, as you maybe able to amend for the last two tax years.
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