Are you getting ready to file your taxes? If so, use these tax planning tips to squeeze as much money out of your return as possible! By following these simple guidelines, you can take advantage of all the tax breaks available and reduce your taxable income.
Are you unsure of how to reduce your taxable income? Are you looking for tips on making the most of this year’s return? If so, then read on – we’re about to show you some easy ways to lower your tax bill and keep more money in your pocket.Â
So whether you’re self-employed or a salaried employee, these tips should help you out. However, remember that everyone’s situation is different, so make sure you talk to an accountant or tax specialist before making any final decisions.Â
It’s that time of year again! Tax season is upon us, and if you’re like most people, you’re looking for ways to minimise your tax bill. Luckily, you can use several tips and tricks to maximise your return. This blog post will outline some of the best tips for tax planning.
With that said, let’s get started!Â
Submit Home Office Expenditures
During the pandemic, have you been working from the comfort of your own home? It makes no difference if it was for a few weeks, months, or the entire fiscal year; you should not pass up the opportunity to reduce your tax liability. The Australian Taxation Office (ATO) developed a simplified process that enables taxpayers to claim a flat rate of 80 cents per hour of labour carried out.
This innovative approach will take care of all the costs associated with working from home, such as purchasing a new work desk, chair, or stationery supplies.
Be aware that if you choose this option, you will not be able to make a claim for the depreciation of an asset, despite the fact that the approach is supposed to save you time and the paperwork and to give you an easy alternative for claiming.
Consider carefully whether or not this is the path that should be taken by you.
At this time, you are permitted to make claims for expenses relating to the following time periods:
- March 1 to June 30, 2021, for 2020-21 tax returns; and
- July 1 to June 30, 2022, 2021-22 tax returns.
Recognise Which Expenses Related to Your Work You Can Deduct
It is possible for you to claim a tax deduction for some costs that are straight associated with the income that you have been given. For instance, you are eligible to make a claim for deductions connected to work if:
- You are responsible for the expense on your own,
- The costs that are directly associated with the production of your income,
- If it has not been reimbursed to you by your employer yet, and
- You are able to substantiate that because you have kept the necessary records.
Most tax deductions for costs associated with employment include:
1. Vehicle and travel expensesÂ
If you use your car for work-related activities, you have the legal right to seek reimbursement for the expenses associated with doing so; nevertheless, this entitlement is contingent on your ownership of the vehicle in question.
You are not eligible for any compensation if your company owns your car or if it is included as part of your compensation package.
Because it is considered private travel, everyday commutes to and from one’s place of employment are not eligible for reimbursement.
You are eligible to make a claim for any expenses incurred while travelling straight between two distinct workplaces. Visit the website of the ATO to find out more information about the deductions available for travel and vehicle expenses.
2. Work-related clothing expenses
This includes apparel that makes it clear what you do for a living, such as an apron and hat for a chef, unique work uniforms, protective gear and shoes, and even protection items like sunglasses.
Additionally, it is feasible to submit a claim for the money spent on laundering, drying, ironing, and dry-cleaning appropriate work attire. Visit the website of the ATO to find out more information regarding deductions for clothes, laundry, and dry cleaning expenses.
3. Home office expenses
If you work from home during the tax year, whether full-time or part-time, you may be eligible to claim a tax deduction for a portion of the expenditures associated with maintaining a home office.
If, on the other hand, you choose to locate your home office in a common space or a room that serves more than one function (like a living room), you will only be able to deduct the costs associated with those hours during which you had sole use of the area. Among the expenses associated with your home office that you might be eligible to deduct are the following:
- Heating, ventilation, and lighting were provided.
- Equipment for use in a home office, such as personal computers, printers, and telephones.
- Calls made for business purposes (including those made on mobile phones), as well as phone rental fees. You are eligible to make a claim for a percentage according to the fraction of time spent using the line for work-related purposes.
- The decreasing value of the furniture and fixtures in the home office. If you outfit your home office with furniture like desks, storage, and cupboards, you may be eligible to take a deduction for the value loss of that furniture to the extent that it is related to the activities that you perform for your employer.
- The value of computers and other office equipment has decreased with time. If you buy equipment to use in your home office, you can depreciate those items over the course of their useful lives and claim a deduction each year for the portion of the expense that is linked to your employment. The electronic devices could consist of desktop computers, notebooks, tablets, mobile phones, and printers.
- Other expenses may include the cost of printer ink, stationery, internet fees, the cost of cleaning, and the cost of repairing the furniture and fixtures in your home office.
- Visit the website of the ATO to learn more about the deductions available for expenses incurred while working from home.
- Learn more about how to qualify for work from home by reading the information provided below.
4. Self-education expensesÂ
If the course you take results in a formal qualification and satisfies the following conditions, then you will be able to take it:
- The class needs to have an appropriate level of relevance to the work that you are doing now; and
- Keep up with or enhance the specific abilities or body of information that are required of you in your current position, or
- Result in a rise in your income from your current employment, or is likely to result in an increase in your income from that work
Please visit the website of the ATO for further information regarding the deduction of costs associated with self-education.
5. Tools, equipment, and other assets
If you are a tradesperson and use multiple tools on a daily basis, you may be eligible to take a tax deduction for the cost of those items provided that you purchased them specifically for the purpose of performing your work duties.
You are also allowed to deduct the cost of a vehicle that you use in your business or for your job, such as a van or a truck, provided that you paid for the vehicle in question.
Tools, equipment, and other assets include calculators, computers, software, desks, home-office chairs, desk lamps, cupboards, bookshelves, and publications relevant to your trade.
You can find additional information regarding deductions for tools, equipment, or other assets by visiting the website of the ATO.
6. Professional organisations, bulletin subscriptions and trade union costs
The good news is that in some cases, you might be able to deduct the cost of your subscription fees if your job requires you to be a member of a professional organisation.
If you are a member of a trade union, your dues and fees may also be deducted. On the website of the ATO, you will find more information about the work-related expense deductions that you are eligible to claim.
Make A Claim For Costs Associated With Your Own Education
The past year has been marked by a general slowdown across the globe, making it the ideal opportunity for many individuals to make investments in themselves and their education.
Have you made any financial investments that can help you advance in your career? If this is the case, you might be eligible for a good little tax reduction as well as a possible increase in the amount of money you get back from your taxes.
Expenses related to your own education may be tax deductible provided that the course you are taking has some bearing on the job that you are currently doing and that it meets both of the following criteria:
Maintains or enhances the specific skills or knowledge you require in your existing employment, or Results in, or is expected to result in, an increase in the money you make from your current job.
You are not eligible to take a tax deduction for costs associated with self-education if the course you took did not have an adequate connection to the job you are currently holding.
Don’t overlook the possibility that you can reclaim your membership in the Remarkable Woman club! There has never been a time when it was more financially feasible to invest in oneself. The courses and tools that are included in our membership, which have a monthly value of nearly $600 but only cost $39, will assist you in taking your professional life to the next level. In addition to that, it includes your personal, one-on-one mentorship, which on its own would cost hundreds of dollars.
Claim The Tax-Free Threshold
Residents of Australia are eligible to make a claim for the tax-free threshold, which allows them to lower the amount of tax that is taken from their wages throughout the course of the year.
What is the tax-free threshold?
It is possible that you will not be required to file an income tax return if your taxable income for the year ending June 30, 2022 is less than the exemption amount of $18,200. This $18,200 level for income that is exempt from taxation is comparable to $700 every two weeks or $1,517 per month.
However, if you have had tax taken from your income throughout the year and you are below the level at which you are required to pay tax, you are required to file a tax return in order to have the tax that was withheld from your income refunded to you.
Typical examples of situations in which tax may be withheld include pay as you go (PAYG) withholding amounts from your salary or withholding from bank interest income in the event that you have not provided your tax file number (TFN) to your bank. Both of these are examples of pay as you go (PAYG) withholding amounts.
Claim After-Tax Superannuation Contribution
Increasing the amount you contribute to your superannuation fund can increase not just the amount you have saved for retirement but also the amount you keep in your pocket after taxes.
Any contribution to your superannuation fund that is made after taxes is eligible for a tax deduction and can be claimed. On the other hand, the tax rate will be 15% if your annual income is less than $250,000, and it will be 30% if your annual income is $250,000 or over.
Remember that the most you can claim in any one tax year is $25,000, otherwise you will be subject to monetary fines. This is another crucial fact to keep in mind.
Additional contributions that count towards this limit include those listed below:
- Any required contributions made by your employer and paid by them.
- Contributions made through reductions in salary
- If you are a member of a defined benefit fund, your notional contributions will be subject to taxation.
Give to a Charitable Cause
Donating money is an excellent strategy to reduce the amount of money that you have to pay in taxes if you are feeling generous.
Any contribution that is greater than two dollars can be deducted from your taxes. However, in order to claim it, the donation must have been made to a recognised charity.
Donations may not always have to be made in the form of monetary gifts either.
Donations to charities, whether they be in the form of clothing, real estate, or household items, are eligible for a tax deduction and can assist in offsetting capital gains through portfolio balancing.
Keep in mind that your donations will not be deducted from the amount of your tax refund. Instead, the amount you claimed is deducted from your income that is subject to taxation, resulting in a percentage refund.
Max Out Your Retirement Account
Contributing the utmost amount possible to their retirement accounts is one of the most prevalent tax-minimization tactics that high-income individuals adopt to reduce their tax liability.
The encouraging news is that individuals of any financial level can utilise this strategy. You have the option of contributing the maximum allowed to your retirement account or deducting a portion of your salary or bonus from the amount that you contribute.
Use Medicare Levy Surcharge and Private Health Insurance to Maximise Your Refund
Investigate getting private health insurance if you haven’t already done so if you don’t already have it.
Individuals who do not have their own private health insurance are subject to a higher Medicare levy premium. A required Medicare charge of 2% is paid by the vast majority of taxpayers.
If you do not have private health insurance and earn more than $90,000 (singles) or $180,000 (families), you will be required to pay an additional premium of at least 1%.
Locate All Your Taxable Income Sources
Identifying all of the sources of income that you received throughout the year and that are subject to income tax will be of great assistance to you when it comes time to file your tax return.
These sums can include the following:
- Your salary or profit from your work as a contractor or employee, including any tips you may have gotten.
- Earnings from investments, such as interest from a bank account or dividends on shares of stock received.
- Some government funds that were received, such as the Youth Allowance, the ABSTUDY living allowance, and the Austudy payment.
- A selection of honours, grants, and scholarships offered by private organisations.
- Payments made by a trust to beneficiaries.
Claim Income Protection Insurance
Then there’s the matter of insurance! It’s not only the prudent thing to do when it comes to risk management, but it also comes with a great tax deduction as a lovely additional bonus!
At the moment, barely two percent of people in Australia seek a tax deduction for income protection.
Therefore, there is a possibility that you are passing up an opportunity to increase your tax return.
If, on the other hand, your income protection insurance is not connected to your job in any way, you should be able to file a claim for it.
Take Advantage of Salary Sacrificing
Employees have the opportunity to minimise the amount of tax they must pay by sacrificing a portion of their salary.
In order to receive the benefits, you are required to give up a portion of your pre-tax earnings. You may use this to pay for things like your retirement benefits, a new car, insurance, a computer, the rent or mortgage, or even your superannuation.
These advantages, which are often referred to as fringe benefits, have the potential to reduce your annual tax liability by thousands of dollars.
There are, of course, restrictions about the kinds of things that can have their salaries reduced or packed together. Nevertheless, prospective Fringe Benefits Tax (FBT) can have an effect on the kinds of products that your place of employment is willing to supply.
One of the most well-liked choices is to include a car purchase in one’s wage package in the form of a novated lease. These three-way agreements between you, your employee, and the financer can provide you with access to a new car and lower the amount of revenue that is subject to taxation.
It may be beneficial to salary package your superannuation in order to boost the amount you receive at the end of the fiscal year.
Ensure That You Monitor Your Taxes
Keeping accurate tax records is not difficult at all.
You are going to need to be ready for anything and capture everything.
Keep track of every receipt in order to maximise your tax deductions.
The process of record-keeping for each tax year can be simplified if you set aside ten minutes every week to upload receipts into the app.
Manage Your Debt
If they are not managed in an effective manner, debts of any kind can quickly snowball into major headaches.
Consolidate all of your debts into a single, more affordable payment so you can stay on top of everything.
For instance, if you have outstanding debt on mortgages, investment properties, or credit cards, you may be able to deduct the interest payments from the amount of income tax that you owe.
If it is adhered to, the debt payback hierarchy will cut these costs more than any other method. However, you should always start by paying off the non-tax-deductible debt with the highest interest rate and then work your way down the list.
Recognise Additional Deductions You May Claim
When preparing your tax return, you should take into account the following additional tax deductions in addition to those already mentioned.
1. The expense of handling tax mattersÂ
If you used the services of a qualified tax agent to complete your return for the previous year and paid them for their assistance, you may be eligible for a tax deduction in the amount that you paid for that service.
In a similar vein, any fees you incurred during the tax year for obtaining professional tax guidance are also deductible. In addition, you have the option of deducting any expenses related to travel that you incurred going to and from your agent.
2. Income protection insurance
You are eligible for a tax break on the premiums you pay for insurance that protects you against a loss of income. It is important to note that this does not include insurance for critical care, trauma, or life.
Neither does it cover life insurance. It also does not cover insurance policies that are bought with money from your retirement savings.
3. Gifts and donationsÂ
You are only eligible to make a claim for these if the organisation to which you gave money is recognised as being eligible to receive tax deductions for gifts (DGRs).
Many charitable organisations in Australia qualify as DGRs, but not all of them do. You are eligible to take a tax deduction for monetary donations as long as the total value of the present is greater than two dollars.
4. Interest and investmentsÂ
Expenses that you have incurred in order to earn interest, dividends, or other types of investment income may be eligible for tax deductions. You are able to deduct the costs of maintaining an investment account as an expense related to interest income.
Only the portion of the costs that corresponds to your individual contribution can be refunded to you if you and your partner have a joint account. On the other hand, you are able to deduct the interest that was paid on money borrowed to purchase shares in order to qualify for a deduction for shares and dividends.
Go to the website of the ATO to learn more about the various deductions available.
Pre-Pay Deductions
Your deductions can be brought forward to this fiscal year if you pay for some expenses in advance. This will reduce the amount of your income that is subject to taxation, which will result in a greater bonus.
To qualify for the benefit, the total amount of pre-paid expenses must be less than $1,000 or they must comply with the 12-month criterion. You are permitted under this regulation to claim an instant deduction as a pre-paid expenditure, provided that the service does not last more than 12 months and is completed within the next income year.
You Might Qualify For A Tax Offset
There is a possibility that you could qualify for tax offsets, which would lower the amount of tax that you owe on your taxable income.
To make a claim for these tax offsets, you are not needed to do anything, and the ATO will figure it out for you when you file your tax return.
If the following apply to your taxable income:
- Less than $37,000, your offset entitlement will be $255
- More than $37,000 but less than $48,000, your offset entitlement will be $255 plus 7.5% of the excess above $37,000
- More than $48,000 but less than $90,000 your offset entitlement will be $1,080
- More than $90,000 but less than $126,000, your offset entitlement will be $1,080, less 3% of the excess above $90,000.
If you qualify for a tax offset, it will either increase the amount of your refund or reduce the amount of tax that you owe if you file an income tax return.
You can get additional information about comprehending tax offsets by going to the website of the ATO.
And Have You Kept Your Employer Up to Date on Any Changes to Your Information?
Employers are required to deduct taxes from the payments you get based on whatever information you supply to them, including a withholding statement, even if it’s not required by law.
Therefore, it is incumbent to you to communicate any changes in your circumstances to your employer.
Over the past few years, I’ve unexpectedly crossed the barrier for when I have to begin repaying my HECS/HELP debt, and as a result, I’ve wound up with a tax burden.
It would appear that I forgot to provide payroll the correct instructions to deduct certain amounts from my salary; nevertheless, by the time this issue was resolved, I had already racked up a debt for the following fiscal year.
According to the Australian Taxation Office (ATO), taxpayers can use the tax tables on their website to establish the amount of money that should be deducted from payments that are provided to them by their employers.
Through their ATO Online account on mygov, about 7.5 million workers are able to view up-to-date information regarding their salary, taxes, and superannuation contributions.
Despite the fact that it might look a little bit different from the way you’ve done your taxes in the past.
An income statement for the full year will be presented to you this time (instead of a payment summary from your employer).
You’ll be able to log in at any time during the year to view these totals on your own.
Consider Your Financial Situation Throughout The Whole Year, Not Just When It Comes To Tax Time
There are a lot of people in Australia who don’t give much thought to their money until it’s time to do their taxes, but self-care may also include taking care of your finances on an ongoing basis. A lot of people try to avoid thinking about this because of their mentality towards money or their ideas about money, which derive from their childhood or other experiences in their lives.
