Make tax time a breeze by taking control of your paperwork and managing your finances wisely throughout the year. This takes the stress out of the equation and eventually lead to maximizing your returns.
Tax time for many may seem like a dreaded task which requires hours of sorting through paperwork only to realise you’ve left it too late and have missed out on the opportunity to maximise on your tax refund. We want to help you make tax time a breeze and ensure your’e optimizing your deductions and tax position. The trick is to start now and consider if you can benefit from any of the points mentioned below.
Here are five essential tips from the Anne Street Partners Tax Team.
Make more tax-deductible contributions to super
Making additional contributions to your super through salary sacrifice or by making additional personal contributions is not only a great way to get ahead on your retirement plans but also reduce your overall taxable income.
The concessional contributions cap for 2019 currently stands at $25,000. You may carry over unused amounts to the 2020 tax year to increase your 2020 super concessional contribution cap. Talk to your adviser to discuss the amount of super concessional cap available to you.
Prepay expenses to qualify for tax deductions this financial year.
You may want to consider prepaying expenses ahead of time so you can make a claim on the expenses for this financial year.
The types of expenses you could potentially prepay and obtain a tax deduction for include professional association fees and memberships related to your employment. Also, if you have a rental property prepaying rates or body corporate fees may be an available option.
Make the most out of private health insurance.
If your income is over a certain bracket (currently $90,000 or over) and you haven’t been covered for private health insurance for this financial year, you will be liable to pay an additional Medicare levy surcharge (MLS). This is on top of the 2% Medicare levy. A basic private patient hospital cover is the minimum level of private health insurance cover required to avoid the MLS.
By taking out private health insurance you are essentially making a choice between privately funding your medical cover versus paying additional tax. The fees associated with private health insurance generally closely match the MLS charges
For example, a single on a $100,000 salary will be charged the MLS fee of 1%. Therefore, they will be taxed $1,000 for the financial year. Basic private hospital cover starts at $80 per month or $960 per year. As a result, by choosing not to take out Private Health Insurance you are not only missing out on the benefit of a tax rebate but also the peace of mind of having private medical resources available to you as well as the Medicare system.
Any capital gains on your investments are considered as taxable income, which could put you in a higher tax bracket, so it’s a good idea to choose your timing wisely if you’re planning to sell any investments.
For example, if you’ve had a big capital gain this year and know that next year your income is likely to reduce, you may consider selling your investments next financial year to reduce the chances of increasing your tax payable this year.
Alternatively, you can also offset capital gains by selling non-performing investments. In this scenario, if you made a capital gain of $80,000 from the sale of one investment and a capital loss of $20,000 on another, you may be able to offset the capital gains income with the loss and reduce your net capital gain to $60,000.
Also note that if you sell an investment, such as a house or property, it is the date of contract completion that is important for your tax return, not the settlement date.
For example, if you sign a contract on or before 30th of June 2019, the capital gain or loss will affect your 2019 financial year tax return.
Make use of the $30,000 instant asset write off
Eligible small to medium businesses will be able to claim a deduction on assets up to $30,000 in value as a total amount of the asset instead of depreciating the amount of the asset over a number of years.
You purchased a work vehicle for $18,000 in October 2018. You can claim a deduction to the full amount in this financial tax year.
Small businesses for the 2019 tax year have 3 different write-off limit amounts.
$20,000 1 July 2018 to 28 January 2019
$25,000 29 January 2019 to 7.29pm 2 April 2019
$30,000 7.30 pm 2 April 2019 to 30 June 2019
The dates refer to when the asset is first used or installed ready for use.
Plan ahead for 2019
If you’re like many of us who get to the end of the financial year and realise they haven’t done the best job of managing their expenses, it’s probably a good time to reflect on areas where you can improve and start preparing now for the new financial year.
Here are our top tips to get started:
- Set up a digital file uploading system to avoid wasting precious hours tracking down receipts, financial statements or invoices, whether it be in the form of an app or setting up folder on your computer to store digital copies of any receipts and statements. We recommend using the ATO’s official app which easily allows you to upload copies of receipts and also has a great car km tracking feature.
- If you own a business it’s a good idea to set up a business bank account to pay all your expenses from. This means all your expenses can be downloaded in one bank statement.
- Consider setting up a budget, if you feel like money disappears from your account like quicksand it’s a good time to check through statements and see exactly where your money is going. Then you can create a solid budget and achieve your financial goals faster.
- It also doesn’t hurt to get some sound advice from a registered tax agent or accountant who can help you understand the overall process of filing including expenses that you’re legally entitled to claim on your tax return.
- Consolidate any debts to start the financial year in the best position possible.
Lastly, our advice to you, is don’t leave your tax return to guess work or miss out on additional tax deductions. By seeing a registered tax agent you have the best opportunity to maximize all the deductions available to you, with the knowledge and resources that they have available to them. You will also save yourself time and stress by leaving it with the experts.
Our Tax Team are happy to answer any questions you may have in this article.
Head Tax Accountant
The information contained in this article is general in nature and does not constitute personal financial advice. It has been prepared without taking into consideration your personal objectives, financial situations and needs. Before acting on any information contained in this article you should consider the appropriateness of the information having regard to your objectives, financial situations and needs.