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YOU know what not to do this tax time.
Now here are all the things you need to get done in the next week-and-a-half before June 30, according to three tax experts.
BUY SOMETHING FOR YOUR BUSINESS
“Probably the top tip, particularly for people who run a small business, is to take advantage of the $20,000 instant asset write-off before June 30,” said Mark Chapman, director of tax communications at H&R Block.
“That means they can go out and purchase any items they need for their business and claim a tax deduction this year, instead of depreciated over several years. If you need new computers, technology, office furniture or even a second-hand ute for a tradie, you can get a really good deal before June 30. That’s definitely worthwhile.”
VISIT YOUR RENTAL PROPERTY
Under changes announced in last month’s Federal Budget, property investors will no longer be able to claim a tax deduction for travel expenses for any visits they make to the property. “It’s worthwhile making any visits before June 30,” said Mr Chapman.
“If it’s in the same city you can charge. If you drive you can either claim the 66 cents-per-km flat rate, if you’re doing less than 5000km per year, or claim your actual costs of petrol and an element of servicing and insurance.
“[For that] you need to keep a log book in which you record all of your journeys, any working trips, plus trips to rental properties, from that you can work out [the] proportion [that relates to rental property] and then apply that to a proportion of all your expenses. If your property is somewhere more distant, you can claim the cost of airfares, accommodation and car hire.”
GET YOUR BILLS IN ORDER
If you work from home, either occasionally or full-time, you are entitled to deductions. “Anybody who works from home really should be looking to maximise the deductions they can claim in relation to their home office,” said Mr Chapman.
“Heating, cooling, lighting, cost of cleaning, depreciation of any equipment, mobile phone. There are two ways to claim your mobile phone bill. If the use of your mobile is very minimal, you can claim a set rate per call. Otherwise you need to keep a diary of your calls over a four-week period, again, then allocate the work-related and personal elements, and work out the proportion. Then you can apply that over your whole bill.”
PREPAY EXPENSES AND DEFER INCOME
“If you’ve got any expenses which are potentially related to the next tax year, you can prepay them this year and claim a tax deduction,” said Mr Chapman. “Professional subscriptions, union fees, insurance fees that might relate to an investment property, anything that’s going to have an impact you can claim this year and advance your tax relief.”
For high income earners, it might be a good idea to defer income until after June 30. “The 2 per cent deficit levy for people earning more than $180,000 is expiring on June 30,” said Mr Chapman. “That means the top tax rate is coming down from 49 per cent to 47 per cent, so if you can defer any income until next year you can save yourself 2 per cent tax.
“It depends on the employer. If you’re expecting a bonus, for example, speak to payroll or HR and ask to be paid in July.”
BOOK YOUR APPOINTMENT EARLY
James Solomons, head of accounting at Xero, said small businesses should book early with their accountant or tax agent to prepare staff payment summaries and start work on their tax return early.
“Payment summaries must be issued by July 14 to be compliant,” said Mr Solomons. “Now is the time to have an honest conversation about the next 12 months for your business and make a plan for the coming year. Though 13 million tax returns are lodged each year, just three million of these are self-lodged, meaning the vast majority of people use an accountant.”
GET YOUR HOUSE IN ORDER
“Is your business paying for services and software that you do not use? Now is the time to review your budget and protect your income expenditure,” said Mr Solomons. “Take stock and review what costs you need and what you can cut or get a better deal on.”
It’s also a good time to take stock of your overall finances. “The average Australian has seven bank accounts or credit cards,” he said. “If your business has leftover accounts, loans or credit facilities sort it all out before June 30. If you feel overwhelmed, a bookkeeper is a great resource help you get the paperwork together. [And] don’t forget to pay your employees superannuation before June 30 so you can claim it as a tax deduction.”
START THINKING ABOUT NEXT YEAR
“Now is the time to also start thinking about getting ready for next year’s tax returns and setting up your business for success for the next 12 months,” said Mark Hearl, founder of Sprout Funding.
“Review your income and expenses for the year and plan how you can maximise growth and profits for next year. Ask your accountant about what you can do to reduce your tax payable income for the next financial year.
“If you haven’t got an organised filing system in place for records don’t put yourself in this position for next year. Take the time and set these up for the year to come, you will thank yourself in 12 months’ time.”