Planning for your income tax is a massive undertaking. You don’t want to miss an expense because you want to claim every tax deduction you can to lower your overall tax obligation. That’s completely understandable. The difference could be hundreds, if not thousands of dollars back in your pocket. However, year after year many Australians struggle at tax time. The best laid plans often go awry, so if you’re struggling, here are some suggestions that my help.
Overcome Procrastination
Tax is boring. We get it! There’s nothing worse than working out how much of your hard earned money you have to give away to the government for nothing. The last thing that many people want to do at the end of the week is go through receipts and tally up tax deductions. However a simple mind switch may help.
Have you considered where your tax money is spent? Many of the services people take for granted in Australia are funded through tax. You see these services everyday but often become blind to them because they’re always there in the background chugging away.
In Australia, your tax money is spent on public education, health, defence, transport, police and emergency services, the economic response to Covid-19, national parks, social security and welfare. Instead of thinking about how much of a hindrance it is to pay your tax, imagine you’re donating to your favourite charity and helping people you otherwise wouldn’t be able to help, or funding the maintenance in your favourite public garden that grows a beautiful rare flower.
Is that a little more motivating to organise your finances and work out your tax?
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Be Organised
Most Australians pay too much tax, and continue to do nothing to reduce this obligation. Many people look for the best bargains when it comes time to update car and house insurances, heating and cooling suppliers and private health insurance but the biggest stone is often left unturned. Paying tax is one of the highest bills the average Australian has to pay. Effective tax planning starts with being organised not just once a year, but throughout the year.
Going through your finances once a year is a massive undertaking, but what if you spent ten minutes each week to make sure you’re organised. That way, when it comes time to lodge your income tax return you can just pull up your documents and you’re good to go.
If you stay current, not only will that save you a huge amount of time and money, but you’ll know exactly where you stand every month. One small error could lead to a tax audit. A good software program will help keep you up to date. Log in those receipts as you get them, allocate your expenses and know your numbers on a regular basis. In the end, it’s all about taking control of your money.
Pro Tax Tip: Don’t forget to keep your logbook updated if you’re claiming home office or vehicle expenses. A log book is part of how you’ll prove your expenses and works in tandem with your receipts.
Make Sure Your Have All Your Documents
ITP Accounting Professionals have a tax checklist (link here) that will guide you to all documents you’ll need to put together in order to lodge your income tax return. Some documents will be automatically seen through MyGov.
Your employer is required to upload your income statement or payment summary which shows your salary or wage, the PAYG you’ve paid throughout the year and superannuation contributions by the 14 July. If your employer is reporting using STP, they are not required to give you a payment summary.
If you have more than one employer, you will receive an income statement from each employer. A tax agent can access your income statements through their software or the online services for agents using your Tax File Number (TFN). Income statements will need to be marked as Tax Ready to prepare and lodge your income tax return.
Pro Tax Tip: You can lodge a personal income tax return through MyGov but remember it’s only simple. MyGov was set up by the Australian Taxation Office (ATO) which is designed to receive tax, not refund it. ‘Free’ is not really ‘free’.
In order to be truly prepared, and also for legal requirements, you might need other documents when it comes to claiming tax deductions. The ATO will want to know your total taxable income. You may earn an income that is not a wage or salary from an employer. Think about rent, shares, bank interest, cryptocurrency and dividends. You might need copies of your bank and financial institution statements, contracts and tax invoices to verify your income, as well as allow you to claim all of your eligible tax deductions.
Pro Tax Tip: The ATO uses sophisticated data matching programs to verify your claims and will detect any discrepancies you may have forgotten. If you’re tagged, it may result in an audit.
It’s important to calculate your total taxable income correctly because there are government allowances and payments as well as tax offsets and concessions, you may be entitled to receive.
Pro Tax Tip: Pensions and government payments you receive are still taxable income and will need to be declared.
HOW A TAX DEBT WILL AFFECT YOUR SMALL BUSINESS LOAN
Know Your Dates
There are key dates throughout the year you’ll need to know if you’re collecting and claiming GST (Goods and Services Tax) and lodging a BAS (Business Activity Statement). Tax season in Australia runs between 1 July to 31 October for individuals.
Pro Tax Tip: If you use a tax agent to lodge your tax return, you may have until the 15 May to lodge your income tax return.
30 June 2022 – end of the 2022 financial year
1 July 2022 – The ATO begins to process tax returns
14 July 2022 – All employers need to issue income statements for their employees to the ATO in readiness to lodge income tax returns. Income statements are due no later than 14 August
31 October 2022 – this is the deadline for lodging your tax return for the 2022 financial year. If you’re using a tax agent, you’ll need to make sure you are registered with them by this date so you don’t incur fees or penalties for lodging a late tax return. Registering with a tax agent allows you to lodge your return beyond this date without incurring fees and penalties
When To Expect Your Income Tax Refund
If you’ve been organised and declared all income and deductions correctly, most tax returns are processed within two weeks from the date of filing. You’ll see your return in your bank account if you’ve chosen to be paid by direct deposit. Paper tax returns can take up to 10 weeks. You can always ask your tax agent if there’s a delay.
Pro Tax Tip: Check your bank details when you lodge your tax return to avoid delays. With an average tax return of $2,800 for Australians’ is 2021, it pays to make sure your details are correct and current.
The best time to lodge your tax return is in late July to September. This allows your employers, Centrelink, and your banking and investment institutions to report all your income into the ATO to allow quicker processing times. Make sure you’ve calculated your total taxable income and are claiming every tax deduction you’re eligible for. You could be leaving money on the table if you don’t. If you leave your tax return to the last minute, you’ll likely procrastinate longer and miss vital details. Lodging your tax return with the help of an agent is 100% tax deductible and you’ll be sure you’re claiming everything you’re entitled to claim. Phone 1800 367 487 and chat with a friendly professional today.