Say goodbye to tax troubles
By Robert Wright /June 03,2022/
Do you find yourself drowning in random receipts when EOFY comes around? Learn to lodge your tax return the easy way with these last-minute and longer-term tax hacks.
Tax paperwork is something few of us take in our stride. In fact, the majority of people hand over much of this responsibility to someone more qualified. But even your accountant can’t do it all for you. Gathering together receipts and records you need to pass along can become a headache when you leave it all to the last minute.
1. Maximise deductions
Depending on your situation – married or single, salaried employee or sole trader for example – there are all sorts of legitimate expenses you can claim against your income to lighten your tax burden. A good accountant can certainly advise on which types of deductions you could potentially include in your return. But whether you’re lodging through an agent or doing your tax return DIY-style, knowing what expenses to record can help you keep receipts organised throughout the financial year.
A visit to the ATO website (www.ato.gov.au) can keep you in the know about eligible deductions in the current financial year. There are also a host of other apps available for keeping track of your spending, and not just the tax-deductible kind. Expensify has been popular for a few years now. Not only does it scan and store receipts, it pulls information including date, time, amount and merchant, into a CSV file ready for your accountant at tax time. There’s also a more concierge-style solution called Squirrel Street available here in Australia. For a monthly subscription you can mail your receipts to be scanned, uploaded and categorised on your behalf.
If you’re eligible to claim some of your car expenses as a deduction, there’s also a nifty app to make this easier too. Providing you’re following the logbook method for calculating vehicle usage, Vehicle Logbook is an ATO compliant app that gives you an easy way to capture and collate all that essential journey info.
2. Be super savvy
Depending on your working arrangements, you may have already contributed to your superannuation in this financial year, either through the Super Guarantee or voluntary personal contributions. By making extra contributions into super, you’re saving more for retirement and may be eligible for tax concessions too. This will depend on your marginal tax rate and how much you’ve already paid into super.
3. Know your offsets
Making extra super contributions, for yourself and on behalf of your spouse, could also see you qualify for tax offsets. Under current Federal Government legislation, tax offsets are available to lower income earners, and for contributions made on behalf of your spouse if they’re on a low income.
4. Investment costs
Just like money you earn from working, income from investments is liable for tax. Whether that’s rent from a property or dividends from shares, there may be deductions you can claim against these investment earnings. While an accountant can certainly offer guidance on these deductions, a Financial Planner can advise you on the overall costs and benefits of your investments. Tax is just one of the costs you need to keep in mind when exploring investment options and coming up with an investment strategy to meet your financial goals.
5. Tidy-up for next time
By knowing what deductions and offsets you can legitimately claim, and keeping on top of record-keeping, you could be boosting your chances of getting a tax windfall after lodging your return. But if your overall finances are in a bit of muddle, there may be just as much value in doing a spot of financial housekeeping and decluttering your finances to get all your money matters in the best of shape for the future.
Source: FPA Money and Life
How to use your tax return to build a stronger financial future
By Robert Wright /September 08,2021/
Whether you breeze through tax time or dread the extra admin, receiving a tax refund makes the effort worthwhile. For many of us, getting a financial boost will be even more welcome this year, and you might be looking around for the best ways to spend it.
Plan how you’ll spend your tax refund wisely
Never underestimate the power of a well-crafted plan – it’s easy to watch funds dwindle when you haven’t given them a clear direction.
Recent research has revealed that 87% of us admit to splurging an average of $2,172 annually as a result of comfort spending, a figure that has increased for one in three Australians since COVID-19 hit. Additionally, 37% of us are struggling to repay debt.
Like any goal, your ambitions for this year’s tax return can be more easily realised if you have a concrete plan in place. In fact, studies have found that taking the time to write down your goals and plans can improve your chances of making them happen.
When you have a clearer picture of your finances, decide exactly how you plan to use your tax refund to avoid excitement spending once it lands in your account. This includes any money you’re hoping to use for a holiday or other splurge – work it into your financial plan to avoid spending beyond your means.
Anticipate your upcoming living expenses
When making your plan, you might want to consider your upcoming living expenses, particularly any large, irregular bills such as car insurance and registration costs, utility bills and general home maintenance.
Putting aside some of your tax refund as a cushion for upcoming expenses or into an emergency fund for unexpected expenses helps you avoid reaching for other financial support – such as personal loans and credit cards – when the bills start to build up.
Pay off debt
If you have some debt to repay, you’re not alone: the average Australian household debt-to-income ratio is around 190%, meaning we owe almost twice as much as we earn each year4 Putting your tax return towards any outstanding debts, including mortgage repayments, personal loans, and any credit card debt, may help reduce any interest charges.
Salary sacrificing into super – how it works
By Robert Wright /July 30,2021/
Salary sacrificing into super is where you choose to have some of your before-tax income paid into your super account by your employer. This is on top of what your employer might pay you under the super guarantee, which is no less than 10% of your earnings, if you’re eligible.
Making salary sacrifice contributions does involve a reduction in your take-home pay, but it also means you could increase your retirement savings while also potentially reducing what you pay in tax. If you’re thinking about setting up a salary sacrifice arrangement, here are some things to consider.
What can I contribute?
You decide how much you want to contribute (as long as you don’t exceed super cap limits) and whether it’s a one-off payment, or something you can afford to do regularly.
How much I can contribute?
You can’t contribute more than $27,500 per year under the concessional super contributions cap or penalties will apply. It’s also important to note that contributions made into your super as part of a salary sacrifice arrangement are not the only contributions that count toward this cap.
Other contributions that count toward your concessional contributions cap typically include:
- Compulsory contributions your employer pays under the super guarantee, including contributions from any other jobs you may have held in the same financial year ·
- Contributions you make using after-tax dollars which you choose to claim a tax deduction for.
What are the potential tax benefits?
If you choose to reduce your before-tax income by salary sacrificing into super, a potential benefit is you may be able to reduce what you pay in income tax for the financial year.
That’s because contributions made via a salary sacrifice arrangement are only taxed at 15% if you earn under $250,000 a year, or 30% if you earn $250,000 or more a year, with most people generally paying more tax on their income than they do on salary sacrifice contributions.
There could also be further tax benefits as investment earnings made inside the super environment also benefit from an equivalent tax saving, which could make a difference when you do eventually withdraw your super savings and retire.
How do I set up a salary sacrifice arrangement?
If salary sacrificing into super is right for you, here’s a quick checklist for how you could set this up.
Make sure your employer offers salary sacrifice
You will need to confirm with your payroll team at work that your employer offers this type of arrangement. If not, you may be able to achieve broadly the same benefits by claiming a tax deduction on contributions you may choose to make using after-tax dollars, but you’ll need to consider whether this is right for you.
Decide how much you want to salary sacrifice, how often and when
You might want to salary sacrifice on an ongoing basis, or as a one-off. Also, you can’t salary sacrifice income that you’ve already received, such as a bonus or leave entitlements, so you’ll need to act well before this money is paid into your regular bank account if you want to salary sacrifice it.
Notify your employer and get any agreement in writing
If you can salary sacrifice (and you know how much, how often and when you want to do it), contact your payroll team at work to find out what information they need. Ask them to confirm in writing when your contributions will start being paid, so you can check that the contributions are being received into your super account.
Make sure you don’t exceed the concessional contributions cap
It’s also worth noting that in addition to your annual cap, you may also be able to contribute unused cap amounts accrued since 1 July 2018, if you’re eligible. This broadly applies to people whose total super balance was less than $500,000 on 30 June of the previous financial year.
Are there any other things I should be aware of?
The value of your investment in super can go up and down. Before making extra contributions, make sure you understand and are comfortable with any potential risks.
The government sets rules about when you can access your super. Generally, you can access it when you’ve reached your preservation age (which will be between the ages of 55 and 60 depending on when you were born) and you retire.
What you can claim when working from home
By Robert Wright /June 11,2021/
Setting up a home office? Here’s how to create a comfortable workspace, while offsetting the extra costs of working remotely. If you’re among those who’s decided to say ‘so-long’ to the office, you’ve probably also realised that having the right home-office set up is essential for your productivity – and sanity.
As many of us learnt during lockdown, trying to fit in a full day’s work at the dining room table isn’t always the most productive option.
You might also have noticed what many freelancers have known for years: Working from home comes with extra costs, as does setting up your home office.
So, what do you need to do to get your workspace set up for productivity – and comfort – and how can you offset the extra costs that come with working from home?
For most computer work, there’s a few key areas you need to customise to suit you:
- The height of your desk and chair. You’ll know you’ve gotten this right when your forearms are parallel to the ground, with your wrists either straight, at or below shoulder level. Your knees should be level with your hips and feet flat on the ground, or on a footrest.
- Your monitor set up. Your monitor needs to be straight in front of you, an arm’s length away. The top of the screen should be at or slightly below eye level. Use a monitor riser if needed to get your monitor to the right height. Also consider the brightness of your display – it should be just a little brighter than surrounding ambient light.
- Location of key objects. Place your keyboard and mouse on the same level surface and keep other items you use often within easy reach. If you use the phone a lot, put it on speaker or use a headset to avoid neck and shoulder strain.
- Light sources. You’ll need sufficient ambient light to illuminate your workspace, so that you’re not straining your eyes. Beware of indirect lighting from windows that can cause glare on your monitor screen.
Getting (and expensing) equipment
Setting up an ergonomic workspace can involve a bit of gear, even if there are some inexpensive home solutions. At the very least you’ll need a computer, decent office chair, full size monitor, keyboard, and mouse. You may also need to add in a footrest, monitor riser, laptop dock or stand, headset, lighting, and any other office equipment you use regularly, like a printer.
This can add up to quite a hefty price tag! But don’t worry, it’s unlikely you’ll need to foot the entire bill yourself.
If you’re a company employee, start by speaking to your employer. Many companies will offer to either source equipment for you, lend it to you or reimburse you for purchase/s you make.
Under Workplace Health and Safety Laws, employers still have a duty to ensure the health and safety of workers, even if they’re working from home. In fact, some companies will already have occupational health and safety policies that mandate an ergonomic set up using a certain type of office equipment.
Tax deductions: What can I claim?
While you can save money by working from home (less transport costs, homemade lunches, no need for fancy clothes) it does come with other costs (and paperwork) you may not have thought about.
Fortunately, you’re allowed to offset many of these costs against your earnings by claiming a deduction in your annual tax return. According to the ATO, expenses you can claim a deduction for include:
- the cost of electricity for heating, cooling, and lighting the area you’re working in, and running items you’re using for work.
- cleaning costs for a dedicated work area.
- phone and internet expenses
- computer consumables (for example, printer paper and ink) and stationery
- home office equipment, including computers, printers, phones, furniture, and furnishings. You can claim either the
- full cost of items up to $300
- decline in value (depreciation) for items over $300.
To make a claim, you need to have spent the money and have a record to prove it. You can’t claim a deduction where you’ve been reimbursed by your employer for the expense.
Tax deductions: How do I claim?
Because it can be tricky to track and report on your expenses when working from home, the ATO has introduced a temporary ‘shortcut method’. This is now in place up until 30 June 2021 (and may be extended further).
The shortcut method allows you to claim a deduction of 80 cents for each hour you work from home. It covers all the deductible expenses listed above. You’ll need to keep a record of the hours you worked, in the form of a roster, diary, timesheet or similar.
With remote work now widely accepted, many people can’t wait to give hour-long commutes, open plan offices and office politics the flick for good. Just make sure you take the time to get your office set-up right and avoid those nasty repetitive strain injuries in years to come.
Source: FPA Money and Life