tax returns

Tips and traps to help maximise your tax return

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    The time has come, if you haven't already, to gather all of your data and prepare your tax return.

    Employees must be aware of the significant adjustments the Australian Tax Office made this year in response to the issue.

    Financial penalties may apply if you fail to file your tax return by the deadline of October 31.

    What are the key things you need to be aware of if you decide to file your return and have reasonably simple tax affairs?

    Don’t file late

    Financial penalties may apply if the October 31 filing deadline is missed. Another important date to keep in mind is the tax payment deadline, which is November 21—three weeks following the lodgement deadline. The ATO will likely charge interest if you pay your tax debt beyond the deadline.

    Most taxpayers use their myGov accounts to file their returns online. The process is streamlined since by late July, the majority of the data from your company, banks, government organisations, health funds, and other third parties is already filled out.

    Online lodging should speed you receiving your tax refund if you expect one. When the return is filed online, the ATO typically issues refunds within two weeks. Paper returns are manually handled, which takes up to 10 weeks.

    Employers have reported through Single Touch Payroll this year, which stands for real-time, direct payroll reporting to the ATO. This means that instead of receiving a payment summary from your employer, you will now have access to an income statement by July 31 through your myGov account.

    How to maximise your refund

    The ATO has established a quick procedure for claiming tax deductions relating to working from home in consideration of the changes that COVID-19 has caused to the working arrangements of many employees.

    If you work from home between March 1 and June 30, you can deduct 80 cents per hour if you can prove that you are performing your regular job tasks and have incurred extra operating costs as a result.

    Remember to keep a record of the time you spent working from home.

    Trap: If you choose to adopt this approach, you cannot deduct any further working expenditures.

    You have the option to keep calculating your deduction using the currently accessible methods (e.g. the fixed-rate plan of 52 cents per hour or the actual cost method). You can select whichever of the three options yields the best tax result.

    Make the relevant capital works and capital allowances (depreciation) deductions if you own rental property. Be informed that beginning on July 1, 2017, the regulations limiting capital allowance deductions for used assets purchased after May 9, 2017, changed. Investors that invest in new machinery and equipment will keep claiming depreciation costs for these assets.

    Tip: To determine the amounts to be claimed in your tax return each year, have a quantity surveyor do an assessment and create a depreciation report. A depreciation report's preparation costs are likewise tax deductible.

    Super contributions

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    To receive tax benefits, you are no longer need to "salary sacrifice" super contributions. All people under the age of 75 (including those between the ages of 65 and 74 who meet the statutory work requirement) may now claim a tax deduction for super personal contributions made to a qualified fund.

    You must submit a "notice of intent to claim" to your super fund by June 20, 2021, or, if earlier, the day the 2019–20 tax return is filed, in order to be eligible for a deduction.

    Trap: To avoid paying too much in excess concessional contributions tax, be aware of the $25,000 maximum on concessional contributions and keep your deductible donations within that range.

    Tax-deductible gifts

    Make sure you've collected all donations given to deductible gift recipients throughout the year. Due to their failure to maintain records, taxpayers frequently forget to claim them. Finding these receipts has gotten easier with the rise in the use of electronic receipts sent via email.

    Private health cover

    You won't be responsible for the Medicare Levy Surcharge if you have private hospital insurance coverage (MLS). It is insufficient to have "extras" or "ancillary" coverage only.

    When a taxpayer's income exceeds $90,000 (for single taxpayers) or $180,000, the MLS will take effect (families).

    ATO cracks down on unusual claims

    Health insurers will no longer be required to provide members with a private health insurance statement as of July 1, 2019. Your health fund information should be prefilled online through myGov if you are filing your return electronically.

    Obtaining a statement directly from your provider may be necessary if the information is not flowing by July 20.

    For more details, the ATO offers useful responses to a variety of frequently asked questions about COVID-19 and the creation of 2019-20 tax returns, including the claiming of tax deductions, on its website.

    The ATO should be contacted to discuss payment options if you are having trouble making your tax payments on time.

    Top Ways to Spend Your Tax Refund

    It's now officially tax season. Even though you might find filing your tax return tedious, there might be a bright side. The average refund as of last year was roughly $3,600.

    And the chances are in your favour as 84% of taxpayers anticipate receiving a refund. But before you begin making preparations for your impending ashfall, consider some of these more creative ways to spend your tax refund.

    Pay off your credit card bills and loans.

    Nearly a third of us who receive a refund will likely use it to pay expenses, according to ASIC's MoneySmart poll. While paying off debt isn't as exciting as taking a vacation, it is a wise choice.

    Start with bills with higher interest rates, such as credit card debt and payday loans. If you have several credit cards, start by paying off the one with the highest interest rate. Paying off debts over time will result in lower interest costs and greater savings.

    Start an emergency fund

    Accidents are exactly what they are—accidents. The last thing you want to be doing when the unexpected happens is maxing out a high-interest credit card; having a rainy-day fund of cash can be a lifesaver. Find an account with high interest rates, and if at all possible, make regular additions to your emergency fund. You'll be astonished at how rapidly it increases.

    Superannuation top-up

    Young people are most likely not considering retirement. Due to rising life expectancy and living expenses, retirees who want to live large will require a lot more money. Your funds have more time to develop if you increase your superannuation early. Before making any further donations, consult with your accountant because there are limits and tax repercussions. You'll be grateful to yourself in the future.

    Mortgage offset account

    You probably pay interest if you have a mortgage. The interest you pay on your mortgage is offset by a savings account called a mortgage offset account, which is linked to your mortgage. With an offset account, you will ultimately pay less interest, putting more money in your pocket.

    Invest in shares

    Research is important before making any purchases so that you can make a wise choice. There are several investing possibilities accessible, depending on how much money you have to invest and how smart you are.

    Do good and donate

    You can think about giving your tax refund to a worthy cause if your finances are in order and your bills are affordable. Aside from the altruistic feelings, giving can be a profitable investment, and all charitable contributions are tax-deductible.

    Invest in yourself

    Whether it's a course you've been eyeing or a new pastime you want to explore, investing in your personal development is always a smart move. It might be deducted on your tax return for the following year, depending on the course and how it relates to your line of work.

    14 tax tips for self-preparers

    Do you know the tax credits and deductions you may qualify for as a self-preparer? The tax advice provided below, including information on cryptocurrency, rental property deductions, and work-related expenses, may enable you to legitimately lower your tax obligation on your 2017-2018 return.

    Claim work-related deductions

    Making use of all allowable work-related deductions could result in significant income tax savings. Common work-related costs include mobile phone usage for business purposes, internet access, computer maintenance, union dues, and professional memberships that the employee paid for out of pocket and were not reimbursed for.

    In order for an expense to be acceptable:

    • You must be the one who made the purchase.
    • It must be closely connected to how you make money.
    • It can't have been paid back.
    • To back it up, you must have the necessary documentation.

    It is wise to be aware that the Australian Taxation Office (ATO) has got a major cash boost in this year's Federal Budget, allowing it to focus more intently on making sure taxpayers claim only the work-related costs to which they are legally entitled.

    A portion of this extra funding will enhance real-time claim verification, other audits, and prosecutions.

    Claim home office expenses

    You may be eligible for a home office deduction if you've designated a portion of your house as being used for work purposes only or largely. Heating, cooling, lighting, and even office equipment depreciation are typical expenses for home offices.

    You must have kept a log of your home office hours for at least four weeks in order to be eligible for the deduction.

    Consult your CPA Australia licenced tax agent or visit the ATO website for further details on home office expenses.

    Claim self-education expenses

    If the study is directly related to preserving or improving present vocational skills or is likely to increase revenue from your current employment, then self-education expenses may be claimed. The costs incurred are not tax deductible if you study to gain new credentials in a different sector.

    Course fees, books, stationery, student union dues, and the depreciation of equipment like laptops, tablets, and printers are examples of common self-education expenses.

    Repayments made under the Higher Education Loan Program (HELP) are not deductible. You must also deduct $250 in non-deductible charges, such as child care, from your self-education expenses.

    Claim depreciation

    Insofar as the investment is used to create income, assets under $300 can be immediately deducted. These resources could be craftsmen, calculators, briefcases, computer equipment, technical publications, or small pieces of landscaping that a landlord has bought.

    Assets with a cost of $300 or more that are used to generate revenue may be written down gradually as a tax deduction. The asset's worth, usable life, and the degree to which you use it to generate revenue all play a role in determining the deduction amount.

    Maximise motor vehicle deductions

    There are two options available to you if you drive a car for business-related travel.

    You can deduct your automobile expenses on a cents-per-kilometer basis if the annual trip claim does not exceed 5000 kilometres. It is crucial that you acquire this year's speed from the ATO or your CPA Australia licenced tax agent as the permitted rate for such claims varies every year.

    While the ATO and, consequently, your tax agent may ask you to demonstrate how you calculated your business kilometres, you are not required to provide written documentation to demonstrate the number of kilometres you have travelled.

    You must deduct all of your car-related expenses using the logbook method if your work travel exceeds 5000 kilometres. To find out more about what counts as work-related travel and which of the aforementioned strategies can be used to improve your tax position, speak with your CPA Australia qualified tax agent.

    Declare deductions for rental property

    Rental property owners who are currently renting out their properties or who have them available for rent are eligible to deduct a number of charges all at once, including the following:

    • interest on loans for investments
    • land levy
    • rates for council and water
    • charges for body corporations
    • insurance
    • alterations and upkeep
    • commision for an agent
    • gardening
    • pest prevention
    • leases (preparation, registration and stamp duty)
    • marketing rental properties

    Because the value of depreciable assets such as stoves, carpets, and hot water systems decreases on an annual basis, landlords may be eligible to claim deductions for capital improvements that are spread out over a number of years (for structural improvements, like re-modelling a bathroom).

    It is vital to keep in mind that landlords are no longer permitted to claim travel expenses paid when inspecting, maintaining, or obtaining rent for residential rental properties. This is something that should be kept in mind at all times. This modification to the legal requirements becomes effective on the first of the year 2018.

    In addition, in order for the investments in issue to be eligible for write-offs of the expenses of depreciating plant and equipment, the investors who made the investments in question must be investors who hold residential real estate assets.

    For instance, beginning with properties acquired on or after May 9, 2017, landlords will no longer be able to depreciate assets that were already existing in the property at the time of acquisition. This restriction will apply to properties acquired on or after that date. This tax credit will still be available to the landlord, despite the fact that they must make a fresh investment in order to qualify for it.

    As of the ninth of May in the year 2017, the plant and equipment of residential investment properties will continue to be eligible for depreciation deductions for as long as the investor continues to possess the asset or until the asset has reached the end of its useful life, whichever comes first. This applies even if the investor sells the asset before the end of its useful life.

    If you want to find out if the costs you have expended are for renovations or for repairs and maintenance, which would mean that they are eligible for depreciation claims over the course of time, you should seek the advice of a tax advisor who has been licenced by CPA Australia.

    Seek advice on residential property and non-residents

    The government has suggested that the capital gains tax principle residence exemption on disposal no longer apply to the Australian dwelling of a non-resident for tax purposes, including Australian expatriates.

    According to the proposal, non-residents who bought homes on or before May 9th, 2017, have until June 30th, 2019, to sell the property in order to continue to use the principal residence exemption. The measure is fully applicable to properties purchased after May 9, 2017.

    It should be noted that the modification applies retroactively to properties purchased after 20 September 1985. The fact that the owner is a non-resident at the time of disposal is the only factor that must be taken into account; it makes no difference whether the taxpayer was a resident or non-resident at the time of acquisition.

    As an illustration, an Australian citizen purchased a house in 1986. The Australian resident decided to accept a job offer abroad in 2016 and is now a non-resident. The person made the decision to sell their Australian home in 2020.

    The capital gain on the property for the full period from acquisition in 1986 to removal in 2020 is taxed because they were a non-resident at the time of disposal. This could lead to an unanticipated tax burden of at least several hundred thousand dollars. If approved, the proposal will also affect the beneficiaries in the event that a non-resident Australian homeowner passes away.

    If you are an Australian resident who is currently residing abroad or who is considering migrating abroad, you should get advice on this proposed policy from your registered tax agent.

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    Maximise tax offsets

    Tax offsets directly lower your taxable income and can total a sizable sum. Your income, your family's situation, and the prerequisites for a certain equilibrium all play a role in determining your eligibility for tax offsets.

    Taxpayers should confirm their eligibility for tax breaks, including as the low-income tax credit, the senior Australians and pensioners credit, and the credit for contributions made to a retirement account on behalf of a spouse with low income.

    Think about your gains or losses from cryptocurrencies

    You must be mindful of the income tax repercussions if you are involved in purchasing or selling cryptocurrency. These differ based on the specifics of your situation.

    Bitcoin is one type of cryptocurrency. Bitcoin, according to the ATO, is neither money nor a domestic or foreign currency. Instead, for the purposes of capital gains tax (CGT), it is the property and is an asset.

    Similar to how Bitcoin is classified for tax purposes, other cryptocurrencies with similar properties will likewise be considered assets for CGT purposes. However, if you run a cryptocurrency trading firm, the income will be considered regular income.

    For tax purposes, anyone who transacts in cryptocurrencies must maintain the necessary paperwork.

    You should get guidance from your CPA Australia registered tax agent if you are dealing in cryptocurrency.

    Watch your superannuation contribution limits. 

    Before the conclusion of the fiscal year, you might want to maximise your contributions, whether they are tax-deductible or not, but remember that the contribution caps have been decreased since July 1, 2017.

    Only $25,000 is the maximum concessional contribution for the 2017–18 fiscal year. Any contributions paid by your employer, salary sacrificed sums, and private donations claimed as a tax deduction by self-employed or essentially self-employed individuals are all considered concessional contributions.

    The excess contributions exceeding the cap that you make to your super and exceed the concessional cap will be taxed at your marginal tax rate. You can, however, request a reimbursement from your super fund for the additional donation.

    Similar to this, the three-year bring-forward allowance is only $30,000 and the yearly non-concessional (post-tax) contribution ceiling is only $100,000. A balance of $1.6 million or higher disqualifies a person from making non-concessional contributions.

    High earners are also reminded that the contributions tax on concessional contributions is effectively doubled from the usual 15% rate to 30% of their combined income, plus concessional contributions exceed $250,000, from the standard 15% rate to 30% of their combined income.

    Important: Don't wait until the 30th of June to make your donations. If you do, your super fund could not receive the gift in time, and it will count towards next year's contribution caps.

    Claim a tax deduction for your superannuation contributions

    Superannuation tax deductions for personal contributions are no longer just available to self-employed people. On July 1, 2017, the regulations changed. In the 2017–18 tax year, anyone under the age of 75 may deduct all of their contributions paid from their after-tax income to a compliant superannuation fund.

    Such a deduction is not permitted to increase or generate a carryover tax loss. If you are under 18 on June 30th, you can only claim the deduction if you earned income as an employee or business owner. If you are 65 years of age or more, you must meet the work requirement in order to contribute.

    You must file a Notice of Intent to Claim a Deduction form with your superannuation fund by the sooner of the day you file your tax return or the end of the subsequent income year in order to be eligible for the deduction. Your concessional contribution cap will be affected by whatever amounts you deduct.

    Superannuation contributions paid on behalf of employees may also be deducted by the employer.

    Consider the superannuation co-contribution

    If their circumstances allow, someone who is anticipated to make less than $51,813 during the 2017–18 tax year should think about making after-tax contributions to their superannuation in order to be eligible for the superannuation co–contribution.

    For individuals earning up to $36,813, the government will match after-tax donations fifty cents for every dollar paid, up to a maximum of $500. For each additional dollar of gross income over $36,813, the maximum then gradually decreases until it reaches zero at $51,813.

    Consolidate your super

    It makes sense for the majority of employees to have all of their super in one location. You'll pay fewer fees, only need to keep track of one fund, and only receive one batch of paperwork.

    Think about combining the existing superfunds you do have into one fund. Decide which best meets your demands by comparing your available cash. Fees, investment opportunities, and life insurance coverage are vital factors to consider.

    Check in particular that you can transfer or replace any insurance coverage you have in a fund in the new fund to avoid losing the benefit entirely. Though it is not a guarantee of how the fund will perform in the future, you can also look at prior investment performance.

    Once you've decided which fund to keep, get in touch with them so they can assist with transferring the cash from your other super funds.

    If you've relocated or changed jobs occasionally, your previous super fund might not have kept up with you, and you might not receive all of your wonderful benefits when you need them. Check the ATO website to see whether you have any missing super.

    Seek independent advice on investment products promoted as being tax-effective

    At the end of the fiscal year, investment goods that purport to be tax-effective are frequently promoted. Before making a choice if you are thinking about making such an investment, get independent advice, preferably from your CPA Australia licenced tax agent.

    7 tips to maximise your tax refund in Australia
    1. Claim All The Deductions You Can. ...
    2. Save Your Receipts. ...
    3. Make Charitable Donations. ...
    4. Prepay Your Bills. ...
    5. Put Money Into A Super Fund. ...
    6. Sell Off The Loss-Running Investments. ...
    7. Review Your Health Insurance.

    Answer: The most likely reason for the smaller refund, despite the higher salary is that you are now in a higher tax bracket. And you likely didn't adjust your withholdings for the applicable tax year.

    Over 14 million people lodge a tax return each year in Australia and of those who receive a refund (about two-thirds) on average they receive just over $2,800 each, resulting in a collective refund of more than $30 billion.
     
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