With just 6 days to the end of the financial year, here are some tax tips for individuals to reduce your taxes.
We cannot emphasis this enough. Too often, we meet clients who have deductible expenses which they incurred for income producing purposes BUT they have misplaced or forgotten to keep their receipts.
If the total claim for work-related expenses is more than $300, ATO requires written evidence to prove your claims. Generally, you need to keep these for five years from when you lodge your tax return in case of a tax audit.
If you are tech-savvy and prefer to do things on the go, check out the app developed by ATO to help taxpayers keep tax deductions and income records all in one place!
Motor Vehicle Log Books
If you plan to claim motor vehicle deductions, you would need to keep a log book.
Under this method you need to:
- keep a pre-printed logbook (available from stationery suppliers) or make your own logbook
- have written evidence of your fuel and oil costs, or odometer readings on which your estimates are based
- have written evidence for all your other expenses.
You can create a logbook and record work-related car trips using the myDeductions tool in the ATO app. If you use and record your trips using myDeductions, you don’t need to keep paper records as well.
Donations to charities which are deductible gift recipients (DGR) are tax deductible. To check if the charity is a DGR, you can check on the ABN lookup portal. It is important to note that crowdfunding campaigns may not be tax deductible.
If your employer provides salary packaging benefits, it will be worthwhile exploring and discussing these options with your trusted accountant (that’s us!). Some expenses which can be salary sacrificed include cars, health insurance, loans, school fees, childcare fees and other expenses such as mobile phones.
You can make concessional contributions (“before tax” contributions) which are tax deductible, and are generally taxed at 15% within superannuation. Such contributions are capped at $30,000 per year if you are under 50.
If you make contributions to a complying superannuation fund or a retirement savings account (RSA) on behalf of your spouse (married or de facto) who is earning a low income or not working, you may be able to claim a tax offset. You will be entitled to a tax offset of up to $540 per year if you meet certain conditions.
Always seek the advice of your financial planner or your accountant who must have an AFS licence to provide advice on superannuation. [Fortiz Accountants holds an AFS Licence, so feel free to make an appointment to chat with us about superannuation.]
Private Health Insurance
If you are a high income earner, the Medicare levy surcharge (MLS) payable. MLS is designed to encourage individuals to take out private hospital cover, and where possible, to use the private hospital system to reduce demand on the public Medicare system. The MLS is payable in addition to the Medicare levy. The base income threshold (under which you are not liable to pay the MLS) is $90,000 for singles and $180,000 for families. To avoid this surcharge, all you need to do is to take out private health insurance cover.
Income Protection Insurance
The cost of premiums for income protection insurance are tax deductible.
Premiums paid for other insurance cover (life insurance, trauma insurance and critical care insurance) are not tax deductible. However, these insurances may already be paid via your superannuation fund.
If you do not hold income protection insurance, life insurance, trauma insurance, or TPD insurance, we are able to assist by arranging for our referral partner to contact you.
Capital Gains/Losses from Shares or Properties
Any capital losses can be used to offset capital gains (but not employment income). If you do not have capital gains, the capital losses can be carried forward to offset capital gains in future years. Therefore, it may be worthwhile to look at your non-performing investments to see if any investment should be sold before 30 June, so that the capital loss can offset against the capital gain.
If you intend to sell any investments and realise a capital gain, consider deferring the sale till after 1 July 2017 to ensure any Capital Gains Tax liability is deferred for another year.
We would be more than happy to assist our clients with CGT calculations prior to EOFY, so that informed decisions can be made.
Other Matters (Family Tax Benefits)
You have 1 year to submit a lump sum claim and confirm your income for that financial year. That means that you will need to submit your income tax returns for FY 2016 by 30 June 2017, or FY 2017 by 30 June 2018. Failure to lodge your tax returns on time may result in Centrelink cutting your family assistance payments.
Hate being hit with a huge tax bill year after year? Contact us to make a tax planning appointment.