Handy Tax Tips!
With End of Financial Year fast approaching, it's essential you’re up to speed on all expenses you’re legally able to claim, as well as deductions and offsets.
For the purpose of this article, we’ll concentrate on matters relevant for those preparing individual tax returns; for information and tips on business returns, it’s worth speaking with a John Hopkins Financial Adviser or Taxation Accountant who can advise you.
Ideally, you should have been keeping track of all claimable items over the past financial year. Here are 10 Tax Tips which will help you legally reduce your tax liability when you start preparing your 2010/2011tax return post June 30th.
1) Work Related Expenses
Make sure you claim all potential work related expenses. These types of expenses include:
- Business and mobile phone costs
- Union fees
- Computer equipment and work tools
You can claim up to $300 of work related expenses without receipts, provided the claims relate to outgoings you necessarily incurred in your job or business.
- Laundry expenses may be deductible in certain circumstances and claims up to $150 do not have to be substantiated.
- Self education expenses (usually in excess of $250) can be deducted, provided the study is directly related to either maintaining or improving your current skills or is likely to increase your income from current employment. The types of deductible self education expenses include course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers.
2) Home Office Expenses
Costs such as heating, cooling, lighting, and depreciation of your office equipment or furniture may be allowable when part of your home has been set aside as a home office. You must have kept a diary for at least four weeks detailing the hours worked at home. A rate of 26 cents per hour is applied to the total hours worked at home to calculate the deduction, or you can provide actual household receipts for the above costs and apportion the cost on a reasonable basis e.g. Floor space.
3) Motor Vehicle Deductions
Examples of work related vehicle expenses you can claim include travel between two places of work, travel to various places of employment or where you have to carry bulky tools or equipment (e.g. ladders, wheel barrows) with you to work. The methods available to calculate your deduction are:
- Where your travel does not exceed 5,000 kilometres for the year, you can claim a deduction for your car expenses on a cents per kilometre basis. These work related travel kilometres must be based on a reasonable estimate.
- You may be able to claim a deduction for your total actual vehicle running expenses which relates to work. Such expenses would include registration, insurance, repairs, depreciation of the vehicle, fuel and maintenance. Such claims are only available where you have maintained the required log book, odometer readings of each trip and receipts (except fuel).
- Where business travel exceeds 5,000 kilometres, it may be possible to claim one third of actual car expenses or 12 per cent of the original value of the vehicle.
- You can choose whichever method that gives you the greatest tax deduction benefit.
4) Rental Properties
Rental property owners can claim many expenses and it would be beneficial for tax purposes to ensure these costs are incurred before June 30th 2011. Such deductible costs include interest on borrowed funds to purchase the property, body corporate fees, council rates, insurance, land tax, pest control, repairs and maintenance costs, property management fees, commission, water rates, the depreciation of assets and the cost of borrowing over time.
5) Non Work Related Deductions
Fees paid (including travel expenses) to see a registered tax agent to prepare your tax returns are allowable in the tax year the fee was paid.
Bank charges and interest payments on money borrowed to purchase shares or other income producing investments are also allowable deductions in the year paid.
6) Equipment Depreciation Deductions
Where tools, calculators, briefcases, computers, laptops and technical books purchased by an employee are used for work purposes, they may be depreciable under the capital allowance rules. Some items may be claimed in full if they cost $300 or less or have an expected life of less than three years. Equipment costing less than $1,000 may be depreciated as ‘low cost assets’, which means they are depreciated at 18.75 per cent of the cost in the first year (even if acquired on 30th June) and at 37.5 per cent of the written down value in subsequent years.
7) Tax Offsets
Tax offsets directly reduce your tax payable and are different to tax deductions, which only reduce your taxable income. Make sure you qualify for and receive the following tax offsets:
- Dependent spouse rebate
- Low income rebate
- Mature age worker rebate
- Senior Australian tax offset
- Medical expenses offset (20 per cent of the excess over net $1,500)
- Private health insurance offset
- Superannuation contributions offset - made on behalf of a low income spouse
- Education tax offset – since July 1st 2008, an education tax offset has been available for families who receive the Family Tax Benefit - Part A. This allows you to claim for 50 per cent of the cost of items such as educational software, computers, internet connections, laptops, printers, school texts and trade tools used in school. The maximum rebate is $375 for children in primary school, and $750 children in secondary school.
8) Concessional Superannuation Contributions
A self employed person, up to age 75, will be able to claim their superannuation contributions, to a complying superannuation fund, as fully tax deductible. However, these contributions will not be tax deductible if 10 per cent or more of a person’s assessable income or reportable fringe benefits is attributable to their employment.
In addition, as at June 30th 2010, the superannuation contributions of all self employed people or salary sacrificing employees will be taxed at 15 per cent. For people younger than 50 years of age, all contributions up to $25,000 will be taxed at this rate, and for those aged 50 or older, contributions up to $50,000 will be taxed.
9) Capital Losses
If you have made a capital gain (e.g. sale of shares or property) during 2010/11 you will be taxed at a discount of 50 per cent of this realised gain at your marginal tax rate. However, you may wish to realise any potential capital losses (e.g. shares) to reduce any realised capital gains made during the 2010/11 tax year. Capital gains cannot be deferred to future tax years, however unused capital losses may be carried forward indefinitely into future years and be used to offset future realised capital gains.
When it comes to doing your tax return, it’s important to engage the services of a professional who can ensure the best outcome possible in reducing your tax payable. We also encourage you to speak with your Financial Adviser when implementing some of these strategies to ensure they are appropriate for your individual circumstances.
At the John Hopkins Group, we have dedicated and experienced Taxation Accountants who can go over all options available to you.
For more information, or to arrange an appointment with a John Hopkins Taxation Accountant, please contact our Client Liaison Officer on 1300 726 082 or click here.