YOUR TAX RETURN QUESTIONS
Do you have any tax return questions? You do
If you are filing your income tax return for the fist time in Australia then you probably have a few questions to ask. So to help you along I have provided some information and links below which I hope will help to answer some of those tax return questions.
In the United Kingdom where you only file a tax return if you are self employed or earning in the higher tax bracket. Here in Australia it is a requirement to file a tax return each year.
Income tax is payable on your assessable income. Your assessable income is calculated by calculating the income you have earned over the tax year less any deductions.
WHEN DOES YOUR TAX RETURN HAVE TO BE LODGED BY?
The financial year starts on 1st July and ends on 30th June. If you are lodging your tax return your self then you need to have lodged your return by 31st October.
If you fail to lodge your return in time then it will cost. The ATO will charge a fee if you miss the deadline, the later you lodge your return then the bigger the fee.
WHAT IS ASSESSABLE INCOME
- Assessable income is income gained directly from your employment or providing services (Wages, salary, consultancy fees, tips etc….)
- Property (rent from real estate, dividends from shares, distribution from trusts etc….)
- Business (profits…)
WHAT IS NOT CLASSED AS INCOME?
- Gifts (as long s you have done nothing to earn the gift)
- Winfall gains (such as winning Lotto)
- Prizes (unless you exert effort and skill to win the prize)
WHAT ABOUT GOVERNMENT BENEFITS AND INCENTIVE PAYMENTS ARE THEY TAXABLE?
There are a number of government benefits, incentives and payments, that are linked to your income. Benefits and incentives that you may miss out on if your income is too high. You may ask the tax return question “If my income is close to the threshold then what tax allowable decuctions could be counted at tax time that may make a financial difference to me”?
A few of the mainstream benefits include.
Family Tax Benefit (FTB)
Family Tax Benefit is paid in two parts, part A and part B. You may be eligible for Part A, Part B, or both. Family Tax Benefit helps with the cost of raising your dependent children and the payment is assessed based on your income. If your assesable income exceeds $94,316 (for one child, more if you have more children), you are no longer entitled to receive the Family Benefit.
Superannuation surcharge is charged as an additional tax on your superannuation if your income and your superannuation contributions exceed approximately TBA pa.
This is where the Government will match your superannuation contribution of $1,00 up to $1.50 for $1 if you earn less than $58,000 pa*.
Medicare Levy Surcharge
This applies to single income earners with income and reportable fringe benefits of over $TBA pa, couples with over $TBA pa of income. The surcharge is an additional 1% (on $100,000, an extra $1,000 in Medicare Levy).
*Taxable income for Family Tax Benefit does not include any losses from Rental Properties. For example, if you earn $90,000, and have a rental to write off of $8,000, Centrelink will not allow you to take the rental write off off.
*Superannuation Co-Contribution matches your superannuation contribution of $1,000 by putting up to $1,500 into your superannuation fund where your income is less than $28,000 pa. It is phased out where you earn more than $58,000 pa.
WHAT ARE ACCEPTABLE DEDUCTIONS?
Is an expense goes towards increasing your taxable income then it may be classed as a personal deduction. Some examples of this could be:-
if you take that is a requirement of your employment and will see you rewarded with a promotion at work. (of course that does not mean that all courses you take can be tax dedutable, the end result needs to be an increase your income).
Home Office Expenses
If you do paid work from your home office then you can claim a proportion of the bills towards thethe runing costs of the home office.
This can only be claimed if it is a mandatry uniform or protective clothing. So if you have to wear safety boots as part of your employment then these could be claimed. Or if your job requires you to work outside then you can claim for the cost of suncream, sunhats, sun glasses etc…Some companies give you the option of wearing an approved uniform which have the company logo on them (purchaed from workwear outlets), these would be an acceptable deduction.
If you use your vehicle for your business then you can claim the costs. However, you can not claim the cost of travelling to and from your place of work. You must keep a log or similar of the miles travelled.
If you are away for more than six nights in a row then you are required to keep a travel diary with a record of work relation expenses.
Tools of the Trade
If your are a mechanic for example and you are required to provide your own tools.
Professional Membership and Subscriptions.
Tax related expenses
yes the cost of paying someone to prepare your tax is an acceptable deduction.
Employment related expenses
(date of the expense, supplier name, cost, nature, date document written). You are not requried to keep reciepts for items costing less that $10 (which can total upto a max of $200 in a tax year without the provisoin of a reciept) ALSO if you are claiming less than $300 a year in employment related expenses you are not requred to keep the records. However, if your cliam exceeds $300 then you must keep records to substantiate the entire amount of the claim.
If you make a donation of $2 or more to charity or a nominated fund and are not recieving any benefit in return (suc as a raffle ticket or pen etc…) then it will be tax deductable.
HOW CAN I REDUCE MY INCOME AND REDUCE MY TAX BILL
An excellent tax return question to be asking and one to think about early on in the tax year.
OK, OK I can hear you saying
“its easy to reduce my income, I could just stop working”.
That is not what I meant………….. the smart thing to do is reduce your income without reducing your lifestyle. If you can build up your financial position at the same time then that’s even better.
To achieve this you need to look at strategies and alternatives which will assist your next wealth position. A financial planner would be a good person to direct your tax return questions. Ask a financial planner your tax return questions now and put some strategies in place for thenew tax year
If you want to reduce your income in this financial year then you will need to implement your strategies before 30 June.
There are several alternatives that you may consider:
Superannuation – Salary Sacrifice:
You can sacrifice some of your salary into superannuation before 30 June for the current tay year.
Superannuation – Self Employed:
Self employed people (earning more than 10% of their income from their own business) are able to contribute to superannuation for themselves and clam tax deduction. There are limits on the amounts, so, please take financial advise and obtain further information.
Advance Payment for Services
if you were to pre-pay the interest on the mortgage of an investment property then you can claim a tax deduction for that cost. However there is a time limit, you can usually only pre-pay expenditure for up to 12 months. so please check and take financial advise before you make the payment (there are some rules which only apply to small business and small tax payers so talk to your accountant for a full explanation on how this works)
WHERE TO MAIL YOUR TAX RETURN
When you complete your tax return you have a number of choices
Complete your Tax Return On Line
You can complete your tax return on line using e-tax a free service provided by the Tax Office.
Use a Tax Agent to Complete your Tax return
You can lodge your tax return via a Tax Agent. If you lodge your tax return via a Tax Agent then you have a little longer to lodge your tax return. REMEMBER if you are using a tax agent for the first time or if you are using a different agent then you need to have contacted them by 31st October.
Complete your Tax Return via the Tax Pack
You can complete the Tax Pack and mail your tax return to the ATO. The Tax Pack is still a popular method. You can get a Tax Pack from newsagencies, Tax Office shopfronts you can down load the TaxPack online from 1 July 2008 or you can phone 1300 720 092.
TAX RETURN CALCULATORS
If you are looking for a tax return calculator so that you can get an idea of how much tax you will have to pay or recieve then the Australian Tax Office is a great place to start. Here you will find a Comprehensive Tax Calculator that will estimate your tax payable. (If you have the time to explore the site you will probably find the answers to heaps more or your tax return questions).
The tax calculator will take about 15 to 25 mintues to complete and will give you an estimate based on the information you enter into the calculator. Like to have a go? Just follow this link and follow the instructions