Taxation planning – End of Year Tax Tips Part 1/4
The end of financial year is here, again and as usual, it’s marked by the barrage of End of Financial Year sales and specials popping up all over the place. Each year, June 30th draws a line in the sand, and for some, a deadline to ensure that you’ve done the things you need to do to ensure your tax return is as robust as possible.
Of course, you should never do anything just for a tax deduction – that’s like cutting a hole in the bottom of your boat to get rid of a rusting nail that might let water in. However, if done right, you can change what and how you do things and gain a greater return and benefit as a result of paying less tax. Here are the top things you can do before the end of financial year to ensure you get as much back as possible.
- Claims relating to your work – Did you know that you don’t need a receipt or any documents to claim up to $300 of work related expenses? Expenses up to the $300 limit for things such as trade publications, work travel and many more can be claimed. Have you spent more than $300 on work related expenses? Obviously you can still claim them, however you’ll need to make sure that you’ve kept your receipts and documentation.
- Working for home costs. If you’re self-employed or do a lot of work from home, then you may be able to claim some of the costs of running your home office. These may include, but not be limited to phone, internet, electricity and depreciation on your plant and equipment (such as computers, furniture and machines). Incidental costs under the $300 limit may be easy to claim, however for amounts above this, it’s best to keep strict records as you don’t want to confuse personal costs with business expense. Note of warning however – if you claim part of the cost on your home loan or depreciation on the house, then be prepared to potentially have to pay capital gains tax on your house when you sell it.
- Uniform expenses are a commonly misunderstood issue. Compulsory and non-compulsory uniforms may be claimable as a work expense. However, just because you have to dress to a particular standard does not make it deductible. A uniform has to be clearly identifiable that it is related to your place of work. Other clothing items such as protective shoes, eyewear and the like may also be claimable as it’s a critical and compulsory item of clothing. Also, check with your employer if your uniform is registered with Ausindustry as they are automatically eligible for tax deductible status.
- Write off those bad debts. If a customer owes you money, in some circumstances you may be able to write off that debt. In doing so, some businesses may be able to claim the amount written off as a tax deduction. This is a commonly used practice with many businesses large and small, however beware that there are certain requirements that must be met in order to do this.
- Tax offset on out of pocket medical expenses. For this financial year, the threshold of out of pocket medical expenses is $2,120. There isn’t any upper limit on this amount. The threshold consists of all eligible medical expenses net of any rebate that you may have received from either your private health insurer or Medicare. Of this amount, you may be able to claim up to a 20% tax offset. Note, there is a bill in in the senate at the moment (The Tax Laws Amendment (2012 Measures No.6) Bill 2012) to set an income threshold on the rebate, reduce it to 10% about that amount and increase the threshold to $5000. Additional changes include higher thresholds for larger families.
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A few quick actions may help put some extra cash back in your pocket. Check out our 10 tax tips to take advantage of before the tax year ends on 30 June.Read more