Wednesday, 30 May, 2018.
With the End of Financial Year fast approaching, now is the time to get your finances in order. Although preparing for tax time might not sound like your idea of fun, it’s something we can’t avoid. Everyone’s financial circumstances are different but these general tips could help you prepare for EOFY.
Grow your superannuation
Superannuation funds are designed to help Aussies save for retirement. The government wants us to build up our super, so taxes this at a much lower rate than our regular income. Superannuation is taxed at 15%, whilst your income could be taxed as high as 45%, depending on what tax bracket your income falls into. Contributing to your super before EOFY could help you reduce the amount of tax you pay once the tax man comes knocking.
Take advantage of sales
EOFY is a time when retailers offer massive discounts, similar to those offered in Boxing Day and Black Friday sales. During EOFY, retailers heavily discount stock to make room for the new stock they will receive in the new financial year. It is therefore a great time to compare deals and make purchases that you can claim as a tax deduction, as you can get the tax benefits from this sooner. However, don’t be pressured into making unnecessary purchases – if you don’t need it, then it’s a waste of money.
Know what deductions you can claim
Even if you do hire an accountant to submit your tax return, knowing what you are entitled to claim can give you some additional peace of mind. Tax deductions are expenses that you can deduct from your taxable income, which means you will pay less tax. Generally, any purchase directly related to your employment can be claimed as a tax deduction. EOFY is also a popular time for donating to charity! If you make a donation of over $2, to a charity that is registered as a deductible gift recipient, then you can claim this on your tax return. Remember that to claim this as a deduction, you can’t receive anything in return for the donation. For example, purchasing a $2 chocolate from a charity will not count as a tax deduction, because you are receiving something in return.
Get a good accountant
If tax time is a taxing experience for you, then you might benefit from hiring an accountant. When selecting an accountant, take the time to check that they are registered with the Tax Practitioners Board, to avoid those who might try to scam you. An experienced accountant will understand Australia’s taxation system and can help to minimise the amount of tax that you pay. You can even claim the cost of your accountant in the following year’s tax return.
Get organised early
Rushing your tax return increases the chances of mistakes being made and claimable deductions being missed. Having a filing system for all your finances will minimise the amount of time that your accountant needs to spend getting your finances in shape. There are even apps that can help you do this throughout the year, so it’s no one big burdensome job at the end of the financial year. The fewer hours that your accountant spends on your tax, the less you will need to pay them. Therefore, being organised will save you money!
Remember that the ATO may ask you to provide receipts, as evidence of any deductions that you claim on your tax return. If you haven’t kept track of your receipts and organised them all before EOFY then you may not be able to claim the deduction. EOFY arrives at the same time every year, so it shouldn’t come as too much of a surprise. However, amongst our busy lifestyles, it’s very easy to forget to prepare yourself for tax time. Following these five tips will hopefully minimise some of the stress of EOFY.
This material has been prepared by By Bessie Hassan, money writer at finder.com.au.
It provides general advice only and has been prepared without taking into account your objectives, financial situation or needs. For that reason, before acting on any advice you should consider the appropriateness of the advice having regard to your personal circumstances.