The end of financial year is looming, which means tax time is around the corner. Just the thought of it is enough to send most of us into a blind panic as we search high and low for receipts, income statements and other paperwork. But the good news is, with a little prep and know-how, you can maximise your tax return and minimise stress come tax time.
We’ve put together a quick checklist of everything you’ll need to do your tax and the common tax traps to avoid.
Tax checklist – what you’ll need
Thankfully, tax time only comes around once a year. But this does mean it can be easy to forget what you need do your tax. Generally speaking, you’ll need to gather the following information before you can complete your tax return.
- Your tax file number
- Last year’s tax return – not essential, but it will come in handy
- The details of the bank account you’d like any refund deposited into
- Your Medicare card details
- Details of your spouse, including their date of birth and taxable income.
It’s essential you declare all your income for the year. This may include:
- Payment summaries: PAYG Payment Summaries from your employer and any termination payments
- Government payments: For example, Newstart, Youth Allowance or the Disability Pension
- Superfund summaries
- Bank statements: That show any interest you’ve earned or fees you’ve paid
- Shares, unit trusts or managed funds tax statements: Information on any dividends you’ve received or shares you’ve bought or sold
- Income from your rental property
- Money made from the sharing economy or crowdfunding: This could include proof of income you’ve made as an Uber driver, or from renting out your home on Airbnb or Stayz.com
- Foreign income: Details of foreign pensions or other foreign income
- Other income: Any cash you’ve received, compensation and insurance payments, employee share schemes, prizes and awards.
For most of us, the best thing about tax time is claiming various expenses from throughout the year as deductions that reduce our taxable income. If you have relevant proof of purchase, here are some of the expenses you may be able to claim:
- Work-related expenses: Software and equipment, books, tools, self-education, travel, uniform, motor vehicle, etc.
- Investment expenses: Investment borrowing, bank fees, financial advisor fees, etc.
- Rental property expenses: Agent fees, rates, body corporate fees, repairs and maintenance, travel, water rates, depreciation schedule, interest on loans, etc.
- Donations to charities: Unless you get a ticket to win something in return
- Insurance costs: Income protection, sickness and accident insurance and private health insurance
- Extra superannuation contributions
- HELP debt or Financial Supplement loans outstanding
- Cost of managing your tax affairs
5 common tax pitfalls to avoid
These 5 common tax errors could land you in hot water with the Australian Tax Office (ATO).
- Not declaring all your income: If the income you declare is different to the income submitted to the ATO on your behalf by your employer, financial institutions or other sources, the ATO will query the discrepancy. This will hold up your tax return and could lead to other negative outcomes.
- Not having a proof of purchase for expenses: You must be able to prove exactly how much you spent by keeping receipts or other relevant records of your purchase.
- Declaring work-related expenses incorrectly: To claim a work-related expense, you must have paid for it yourself, have relevant proof of purchase, not have been reimbursed for it and only claim the work portion of the cost (if it’s used for both work and personal purposes).
- Claiming self-education related expenses incorrectly: You can only claim self-education expenses if your study is improving your skills or knowledge for your current job and is likely to lead to an increase in income in that role.
- Overclaiming for work-related travel: You can only claim transport, meals and accommodation for the work portion of a trip if it’s for both work and personal purposes.
Need more expert tax advice?
ITP’s team of professional and friendly tax agents can make tax time hassle-free while ensuring you get back your fair share of tax. Contact us today to learn more.