Tax time can be a major headache, but with a few tips from the experts, it can be smooth sailing.
1. Get organised early.
Don’t leave it too late to look at your tax duties for this financial year. Planning early enables you to see your expense and roughly calculate the amount of tax you’re going to have to pay, advises Brad Callaughan, director of accounting firm Callaughan Partners.
“Being prepared with good records also allows you to claim everything possible you’re entitled to, which will also help should you be subject to an audit by the ATO,” he says.
2. Use a checklist
An end of year checklist can help you avoid some common tax pitfalls, advises, director of Prosperity Advisers, Stephen Cribb.
“It is vital to get hold of a good year end planning checklist to look at the year-end holistically for business, family and employees,” he says.
For an individual, this includes:
- Packaging and FBT
- Investments and Capital Gains Tax
- General businesses (if you have a business as a sole trader or through a company, trust or partnership)
- Small business entities
- Other issues
3. Consider super
If you or your partner are working part-time, or worked only part of the financial year, you could benefit from the super co-contribution. This means that you contribute $1000, and the government contributes $500 if your total income is below $33,516 for the year. There’s also the spouse contribution tax offset, which is an 18% tax break available if you make a contribution up to $3,000 to a spouse’s super account and their income is under $10,800 for the year.
4. Ask about capital gains
Make sure you ask your accountant about capital gains tax, advises Michael Miller, of MLC Advice Centre.
“If you’ve already sold assets for a profit, selling others held at a loss might reduce your tax hit. If you’re planning to sell others for a profit, consider whether you’re better off doing so in another year, or if you’re able to split the sale across both years if selling shares or managed investments,” Miller says.
5. Pay in advance
Small business owners should consider paying recurring expenses in advance.
Intuit, the maker of QuickBooks Online, says if your cash flow allows it, paying things like insurance, interest, rent, conference fees, subscriptions and travel costs can mean an immediate deduction, explains Brad Peterson, vice president and managing director of Intuit Asia-Pacific.
“Paying in advance will generate an immediate deduction for you this year. Just be sure that the expense covers a period of no more than 12 months, otherwise it won’t be eligible.”
You can also claim deductions now for future expenses, Peterson explains.
“You may be entitled to claim an immediate deduction for expenses you are committed to, goods or services you have received or for work performed – even if it won’t happen before year-end.”
This includes salaries and wages for work performed by employees from the date of your last pay run to 30 June, even where those wages won’t be paid until the new financial year, plus staff bonuses and directors fees, he says.
“But remember, not all expenses are eligible, so be sure to check with your accountant before you make any claims,” he says.