It pays to be ready when the fiscal year comes to a conclusion so you can make sure you're obtaining the maximum return on your tax claim.
You can use a few strategies to increase the amount of your Australian Taxation Office return. These consist of both continuing tasks that you must finish during the course of the year and particular procedures for handling your actual tax claim.
Let's look at some easy ways to increase your tax return at the end of the fiscal year, whether you plan to use it for a vacation, to pay bills, or to put it away in your savings account (EOFY).
There is no "one size fits all" method for preparing and submitting a tax return for the EOFY. To get the most out of your return, abide by these professional advice.
Tax time is nigh!
You can make a profit or lose money when you sell different kinds of capital assets, such stocks or real estate. This cost pertains to both purchasing the asset and selling it.
Regardless of whether you made gains or losses, you must declare capital gains and losses in your income tax return when you file for the fiscal year and pay tax on your capital gains. The portion of your income tax that is referred to as Capital Gains Tax (CGT) does not require separate filing of a return.
If you make a profit when you sell a capital asset, that gain will be added to your assessable income and could raise your tax obligation. Because capital gains tax withholding is handled differently, you might need to figure out how much money you own and include that sum in your return.
In this case, selling your capital assets will result in a loss that you can offset by reducing your liability.
If you bought your assets prior to September 20, 1985, then you are not required to pay taxes on any of them. As a result, you must pay capital gains tax on all of your assets.
- Personal property, such as your home, car, furniture, etc., is free from CGT.
- CGT does not apply to depreciating assets if you utilise them only for taxable purposes, such as with company equipment or some fixtures in rental property.
You must keep in mind that entering into a contract for the disposal of assets, as opposed to just settling your assets, is required if you made a capital gain or loss. Therefore, you must report gains or losses to the ATO through your 2016–17 tax return in the financial year if you sign a contract of sale for any investment property in July 2017 and close on it in September 2017.
If you live in Australia, CGT will be levied on all of your income. However, CGT will apply to assets that are "taxable Australian property" if you are a foreign resident for tax purposes and you make a gain or loss.
Capital Gain Tax (CGT)
It is usually when you enter into the settlement for disposal, not while you settle, that determines whether you realise a capital gain or loss. Therefore, if you enter into a contract to sell an investment property in June 2020 and close on it in August 2020, you must report any capital gains or losses on your 2019–2020 tax return. If you live in Australia, CGT is applicable to all of your possessions, no matter where they are. Citizens of Norfolk Island must pay CGT on any property they purchase starting on October 23, 2015. In the event that a CGT event occurs involving an asset that is "taxable Australian possessions," foreign residents may experience a capital gain or loss.
- Your home, car, and other assets used for personal purposes, including furnishings, are all excluded from CGT.
- Additionally, depreciating assets utilised just for taxable purposes, such as commercial furnishings or equipment in a rental property, are not taken into account by CGT.
You often experience a capital gain or loss when you sell a capital asset, such as stock or real estate. This represents the gap between the cost to collect the asset and the benefit of delaying it. You need to report your capital gains and losses on your profits tax return and pay taxes on those gains. Although it is referred to as capital profits tax (CGT), this is actually only a subset of your profits tax.
A capital advantage is added to your assessable profits and can substantially raise the amount of tax you must pay. Since tax is not deducted from capital gains, you should calculate how much tax you may owe and set aside enough money to cover the appropriate amount. If you are experiencing a capital loss, you cannot offset it against your other income, but you can use it to offset a capital advantage. Unless specifically excluded, all assets you've acquired since capital gains tax was introduced (on September 20, 1985) are subject to CGT.
- Any asset acquired before September 20, 1985, is referred to as a pre-CGT asset. However, if significant changes are made to an asset (such as necessary additions to a structure) or if the original owner passes away, the asset loses its pre-CGT popularity.
the home, apartment, etc. that serves as the taxpayer's principal dwelling plus the first 2 hectares of an adjacent parcel of land that is utilised for domestic purposes.
- Items purchased for personal use that cost up to $10,000, such as boats, furniture, electrical equipment, etc. For the $10,000 cap, items often purchased as a hard and fast must be handled collectively.
- A private use asset used to create a capital loss. Any capital loss derived from a private use asset is disregarded (S108-20(1) ITAA1997);
- Art, jewellery, stamps, and other collectibles purchased for up to $500 and kept for personal enjoyment For the $500 restriction, items that are typically offered as a hard and fast must be handled as such. If the price of collectibles occasionally goes up, this exemption might be helpful to a taxpayer who is amassing little objects.
- Automobiles and other small motor vehicles, such as bikes ("small" being a sporting capacity less than 1 tonne and much less than nine passengers). This exemption is actually detrimental because car prices often go down. However, the exemption also applies to ancient or valuable cars, so if their price rises, the exemption is an added benefit.
- Compensation for a private injury, work-related injury, or illness of the individual or a family member. (However, CGT is entitled to compensation for contractual violations.)
- Life insurance policies that the original owner has relinquished or made available. Such profits are instead taxed as ordinary profits (whilst held for much less than ten years). A third birthday party who purchases the type of policy will face the same CGT difficulty as on a typical investment.
- Gambling profits or losses (which might be additionally free of earnings tax).
- Discounted bonds and notes, such as zero-coupon bonds, and "conventional securities" (sure hobby bearing notes convertible to shares). The profits from such are typical taxable gains and losses.
- Awards for bravery and valour, provided they are obtained without expense (financial).
- Shares of a pooled development fund, a special structure with rules that make challenge funding possible. The CGT is also not applicable to some specific qualifying venture capital investments.
Tips to Maximise Your Tax Return
Know what to claim
If you maintain a home office for work or study, familiarise yourself with the expenses that may be tax deductible, such as office supplies, technology, software, phone bills, insurance premiums, and a portion of utility and phone bills. Visit the Australian Tax Office website if you're unsure.
Get an expert opinion.
As soon as the fiscal year starts, schedule a meeting with your accountant. You can then implement any investment and deduction options you may have to maximise your return before June 30.
Maintain an organised office
You can find it difficult to stay on top of administrative activities and more likely to lose crucial tax documents if your home office is disorganised. By purchasing a filing cabinet, scanner, printer, filing trays, etc., you may make your workplace space more effective. Keep in mind that if you work from home, the majority of these expenses can be deductible.
Save digital copies
You will require sufficient purchase records in order to file your tax return. Since most receipts' ink fades with time, be careful to scan them and preserve a copy in digital storage. Having all of your records in one file also makes filing your taxes on June 30 easier.
Keep a track record.
It is simple to make a claim for supplies like accounting software or stationery that are only used for business or study at home. You'll need proof to support the percentage of the cost you desire to claim for expenses that are split between personal and business use, such your mobile phone or operating costs. Keep a thorough record of all costs associated with your home office, such as an itemised phone bill or journal entries for at least four weeks.
Bring forward expenses
The more expenses you can deduct before June 30 the larger your tax return may be, thus organising your bill payment schedule to fall within this financial year is another advice to maximise your tax return.
Tell your employer if you take on a second job.
Taking on a second job and accidentally claiming the tax-free level ($18,200) twice is a common tax mistake that frequently results in a tax bill rather than a return. When beginning a second employment, be sure to quickly discuss this with your employer.
Check your thresholds
Check your proximity to the necessary criteria since there are a number of tax offsets and rebates that may be available to you. The health insurance rebate, the low-income earner's tax credit, and the nett medical expenses tax credit are a few examples.
Keep the Department of Human Services updated
The quantity of income in your family will determine how many government benefits you are eligible for. When preparing your tax return, if you find that your wages have changed, be careful to notify the Department of Human Services. To assist you in determining the amount of cash you may be eligible for, the organisation provides an online estimator. It's crucial that you start working on this well in advance of June 30 because it can take some time to file and obtain the necessary forms.
Lodge your tax return on time
It's unfortunate to put in all the effort to compile your papers only to submit your return after the deadline. Check the deadline to avoid the possibility of a fine or general interest charges as it will vary based on your manner of filing. Consult the ATO website or ask your accountant for a list of important lodgement dates.
Migrating to Australia – Tax Tips
First things first
Make sure to apply for a Tax File Number if you're still in the planning stages of your trip to Australia and intend to work while you're here (TFN). Anyone working in Australia is expected to have one; if they don't, they will be subject to a 45 percent income tax.
Understanding the Medicare Levy
You will be given one of two working holiday visas, depending on your country of residence (417 or 462). The primary distinction is that citizens of 11 nations are now eligible for the reciprocal health care agreement under Subclass 417, which necessitates payment of the Medicare Levy at 2% of taxable income.
People who receive a Subclass 462 aren't qualified for the Reciprocal Health Care Scheme, thus they can use their tax return to request a reimbursement for the Medicare Levy.
When it comes to taxes, you'll be charged at a little higher rate than inhabitants if you're a working tourist (also known as a backpacker) or an international student. We acknowledge that this is unfair, but it also means that you will receive more money when you depart for home.
You will pay 15% tax on all income up to $37,000. Following that, the tax rate increases to 32.5 percent.
What can you claim?
Now for the good part. Depending on your field of employment, you may be able to claim back some expenses.
We've compiled a list of expenses that qualify as tax deductions since they are related to your employment and are not typical expenses you would be expected to pay for (sorry, but you can't deduct the cost of your travel to and from work).
If your home is your primary place of employment, this also applies to travelling to and from work-related meetings and functions.
You can deduct the costs of lodging, meals, and transportation if your job needs you to travel across considerable distances or remain overnight. However, you can only make claims up to the amount of the allowance provided by your employer, and clearly, if you were reimbursed for these, you won't be able to account for them.
Even if you buy a car largely for work, you cannot claim against the actual cost of the vehicle; nevertheless, you can claim against depreciation based on the percentage of work-related use, as well as running costs, fuel, oil, and maintenance.
There are two ways to go about claiming a deduction for your car.
When the car is utilised for work-related activities, keep a logbook for at least 12 weeks and record the odometer readings to present as evidence of use.
You can still claim up to 5,000 kilometres at the government-accepted rate of 68 cents per kilometre even if you haven't kept a log. Although you are not need to provide fuel receipts, you will need to be able to demonstrate your method for calculating the total number of miles in the event of an audit.
Whether it's a uniform or not, if you have to buy clothing for work, you can claim a percentage of the cost as a tax deduction. This is especially important in the case of any required protective or preventive apparel, like caps and sunglasses. Don't forget to factor in cleaning costs as well!
Tools & equipment
If you have to personally finance the purchase or transportation of tools and equipment for work-related purposes (such as trade or construction activity), these expenses are deducted from your income on your tax return.
Winding Up a Deceased Estate
A legal personal representative may need to sell some or all of the estate's assets in order to administer and close the estate of the deceased. Any capital gain the legal personal representative makes on the sale of the assets is subject to CGT, and the disposition of the assets is subject to the standard procedures.
Similar to this, it can be essential for the legal personal representative to purchase an asset, for instance, in order to fulfil a specific bequest. When they transfer that asset to the beneficiary, any capital gain or loss they experience is subject to the standard CGT regulations.
The standard CGT regulations also apply when a beneficiary sells an inherited asset.
Collectables and personal use assets
When you obtain a post-CGT collectable or asset for your own use as a beneficiary or the appointed personal representative of an estate, it is still regarded as such.
The main residence and other dwellings
If the item was the person's primary dwelling, special requirements apply.
Even if a residence was not the decedent's primary residence, under certain circumstances, you may be eligible for a full or partial exemption when disposing of it.
It's never too late to begin keeping track of your expenses and forming better spending habits for the upcoming fiscal year. You'll be astonished at the difference a receipt/spending tracker can make to your bank account, both now and during tax season.