Top Tips for Preparing Your Income Tax Return
The end of the financial year can be an exhausting and stressful time for small businesses and individuals. Throw in the complications of Covid-19, and, preparing for the EOFY has become an increasingly complicated process for all. As we head to the end of the financial year, we have provided a short list of things all our clients and all the readers must consider. To maximise your tax return and get everything you are entitled to claim at the EOFY, we recommend seeking the advice of a proven professional well before June 30, 2021. We have also updated our Tax Planning Guides and which you can download as also.
Tax Preparation Tips
Set time aside now for the declutter process. Rome wasn’t built in a day and decluttering your books and source documents won’t be achieved in one day either. Separate the below tasks into chunks and schedule them over the coming weeks.
- Ensure your accounting file is in order – a clean and accurate set of books not only guarantees the reliability of your financial reports, but it will also put you in the best possible position for EOFY.
- Upload all outstanding invoices and receipts. Pull out all the receipts from your glove box, bags and anywhere else you stash them and get them uploaded into the file. Then going forward, use an App to keep your filing up to date and avoid backlog. Ensure all paper invoices and receipts are scanned and appropriately filed, attached to transactions, or named for ease of retrieval later. You can also use this step to declutter your filing system. If you require an App to act as an electronic filing cabinet, please just ask.
- Complete any outstanding end of month reporting. If you are behind in your end of month financial reporting, now is the time to get caught up. If you need assistance with this task, reach out to your Accountant who can provide you with a month end procedure, a checklist, and a bookkeeping resource to assist if necessary.
If you are keeping paper copies of documents, make a commitment to yourself next year to “go paperless”! We have the tools and resources to achieve this, and the process is entirely liberating and empowering. Clean out the filing cabinet or bookshelves. Archive any previous year/s accounts and clear out room for this year’s accounts.
- Review all your monthly subscriptions and cancel or lower any that you have not utilised this financial year. Cancelling any unused subscriptions saves unnecessary cost and reduces workload.
- Review and streamline the number of bank accounts you have. Do you need all the opened bank accounts you have, can you merge and close any accounts? Excess bank accounts result in transfers and reconciliation overload.
- Review your accounting processes and make a list of your pain points. Review all manual steps and consider tasks that could be automated. Decluttering your accounts is not just about clearing out paperwork, it is also about decluttering your processes.
Hanging out for that end of financial year (EOFY) income tax return in hopes that you will feel cashed up? Knowing how to legally minimise your tax liability and maximise EOFY benefits can give your bank account a boost. There’s nothing like opening your bank app to see a large cash injection courtesy of the ATO.
Seeing a financial advisor or a specialised taxation accountant could mean the difference between a tax bill and still be swimming in debt up to your eyeballs from student loans to shouting your friends to a weekend away.
2. Salary Sacrificing Tax Offsets
Salary sacrificing is an arrangement you can set up with your employer to help reduce the amount of tax you pay. You can opt to receive less money each payday and have it contributed to your superannuation. Alternatively, you can use salary sacrifice for fringe benefits. Common fringe benefits include vehicles, property (lands, buildings, shares or bonds), loan repayments or even childcare costs. It’s important to note this agreement is not going to affect your EOFY entitlements, so talk to a financial advisor to be aware of the tax offsets, how it may affect your Medicare levy and any amounts you must pay against any outstanding student loans. These types of arrangements could also affect Centre Link benefits.
3. Claimable Working Expenses
In the age of the global pandemic, it’s not unusual for most people to have a side hustle or a hobby that generates a secondary income such as creating art or crafts for sale at the markets or using web development skills. Any expenses acquired like tools/equipment, working from home expenses, training and education expenses, mobile devices, even a portion of rent or electricity may be tax-deductible. All expenses must be work-related with proof of purchase. Talking to a taxation accountant will help ensure you claim for everything you’re entitled to.
4. Gifts And Donations
If you get behind your favourite charity and donate, you may be entitled to claim a deduction (excluding crowdfunding). Donations of $2 or more are claimable providing the donation was voluntary. Make sure you get a receipt for all donations.
5. Personal Super Contributions
If you have contributed extra to your super fund you may be entitled to claim deductions on those contributions if you get a regular salary or wage, income from investments, own a business (or freelance), partnerships or trusts. However, it’s important not to exceed the limits of super contributions. How much you can contribute to your super fund and whether your fund is allowed to accept your contribution may also depend on your age and total super balance. Again, the need to talk to one our specialist is imperative when talking superannuation.
6. Tax Entitlements For Property Investors
If you are entrepreneurial-minded and focused with the end goal to work less and provide for your family, you may want to consider the tax perks that come with property investment.
When drawing a passive income from rentals, property owners are entitled to claim ongoing repairs and property maintenance providing the property is listed on the market for lease or tenanted. Regular lawn upkeep, pest control and gardening are all considered tax-deductible, just to name a few. Make sure you keep accurate records and receipts. A taxation accountant will ensure you’re claiming everything you’re entitled to and use those entitlements to offset your tax liability—more in your bank account come tax return time.
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Chan & Naylor, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
Chan & Naylor is Australia’s leading property, business, tax-accounting & wealth advisory group with offices nationwide.