Tax season can be really stressful for individuals and more so if one is not aware of the tax laws of the country. The regulations of the Australian Taxation Office (ATO) should be strictly followed while lodging an individual tax return to avoid any future issues.
Below discussed are some important tips regarding personal tax returns that you should know about.
Claim as Much Tax Deductions as Possible
A tax deduction is essentially an expense you incur to earn an income. By keeping all your expense receipts, you can claim these tax deductions on your annual tax return and reduce your total assessable income on which you need to pay tax. So, overall it means you generate a lower tax bill for yourself. Some of the expenses that you can claim as tax deductions include:
- Work-related expenses such as tradespeople are eligible to claim the cost of tools and equipment, and people working from home can claim electricity, phone, and internet expenses.
- Vehicle and travel expenses are directly connected to your work; however, these do not include expenses for traveling to and from work.
- Self-education expenses are relevant to your work such as textbooks, course fees, subscriptions, and memberships which lead to formal qualifications.
- Charitable donations of $2 or more are tax deductible in Australia.
- Expenses you make for managing your tax affairs like paying your tax accountant in Perth to prepare your personal tax return.
The ATO lists down a few points that you must meet for claiming expenses as work-related deductions:
- The expenses must be directly related to your job;
- The expenses must have been paid for by you and not have been reimbursed;
- You must have records such as a receipt or tax invoice in order to prove the expenses.
Documents Needed for Lodging Your Tax Return
Below listed are some of the documents you may need for lodging your personal tax return but are not necessarily limited to:
- Your tax file number.
- Details of your bank account so that the ATO knows where to send any tax return you may be entitled to;
- Any income statements or payment summaries from your employers;
- Details related to any other income sources such as business, property, shares, or investments;
- Payment information from Centrelink (Services Australia) related to relief and assistance packages;
- Statements or receipts for the expenses you are claiming as deductions;
- Receipts from donations to charity if you have made any;
- Information about any private health insurance you may have.
Note that if you plan to lodge your personal income tax return by yourself using myTax, you will generally find most information from your banks, employers, health funds, government agencies, and other third parties are pre-filled by late July.
Pre-Filled Data from the ATO
As discussed above, you will find pre-filled information from the ATO’s systems, but do not rely on it as it can be incorrect or incomplete. Many third parties like banks do not provide your information to the ATO until late July or early August, so if you lodge early using the myTax system of the ATO, you will find a lot of data missing from the pre-fill.
If you miss out on an income, you may get questioned by the ATO, and you will be liable for the mistake even though you did take the information from the ATO’s systems.
So, it is advised you hire a tax consultant who won’t rely on the pre-filled data but rather prepare your return from your documents’ source. That way, you can lodge your return early without running the risk of missing out on any income data.
Advantages of Tax Offsets
The Commonwealth Government provides several tax offsets or tax rebates that can help make tax season more affordable for certain people. These offsets are available for:
- People having a dependent relative;
- Low-income earners;
- People receiving government benefits;
- People having private health insurance;
- Pensioners and older people in Australia.
Sacrificing your salary refers to using some of your pre-tax earnings for paying for a particular benefit. It is also known as salary packaging and is an arrangement that you can make with your employer. It can be utilized to pay for anything from child care to superannuation to health insurance and even home loans.
Contributions to Your Super Fund
You can save significant money on taxes by salary sacrificing a part of your pre-tax into your superannuation fund. Salary sacrifice contributions to a super fund are taxable at a 15% rate. So, you not only save for a secure life after retirement but also make a better deal out of your tax return.
However, remember that there is a limit on the contributions that you can make to your super fund via salary sacrifice every year, which you check out at ATO’s official website.
If you are self-employed or a low-income earner, you can also make non-concessional contributions. That way, you can have a benefit of up to $500 of government contributions each year, while as a self-employed individual, you can claim your voluntary super contributions as tax deductions.
Hire a Registered Tax Consultant
While you can lodge your tax return by yourself, it is recommended you hire an experienced tax agent who can accurately prepare and lodge your return. You should ensure that your tax consultant is registered with the TPB (Tax Practitioners Board), which you can check on the TPB website.
You may miss out on any information or deduction if you are not totally aware of the latest tax regulations, while a tax agent is well-versed with the ongoing tax rules, so can make sure all the information in your return is accurate and legitimate. You also get to claim a deduction for the fee you pay your tax agent in the next financial year.
You should always consult the leading tax agents and know about their rates and services before settling for a tax Accountant in Perth that best suits your budget and requirements.