Getting ready for tax time 2017
Whether you work for someone else, run your own business, or freelance, getting ready for tax time can be overwhelming. After all, most of professions do not delve into the deep, dark realms of tax laws and rebates.
To make it a little easier for us, the Australian Taxation Office (ATO) has created a number of videos that explain what we need to do at the end of financial year – without the confusing jargon. We’ve also outlined four great tips to help ease EOFY anxiety, and hopefully save you some money.
1. Assign the role
Firstly, you need to figure out who’s going to be doing your taxes for you. Tax agents normally charge anywhere from $100 to $150 while senior accountants will charge anywhere from the mid hundreds to mid thousands, depending on the scale and complexity of your business. You could also file your own taxes by using the ATO’s eTax online lodgement software.
As much as it is off-putting to have to pay someone to do something for you, it is important to be realistic about who should do your taxes. If you predict your tax affairs to be complicated or complex, advice from a tax professional will prove to be invaluable.
2. Put a plan in place
When it comes to finances, it goes without saying that planning is a great way to stay on top of things. Getting ahead of the financial year-end (every 30th of June for businesses and 31st of October for individuals) will put you on top of your tax game.
If you’re a business owner, you may want to look over any bad debts and write them off if you think you won’t be able to recover them. By writing off your bad debts early, you will be able to claim a tax deduction for them.
If you’re an individual expecting a tax return, why wait until the 31st of October? Having your money sit at the ATO waiting to be sent to you is a waste of opportunity when it could be put to immediate good use.
3. Be organised
If you want an easy tax process, you’ll definitely need to be organised. Don’t worry, we’re not talking about OCD organisational levels but rather something as simple as keeping a folder specifically for tax.
By making it a habit to immediately keep tax-related information in your folder, you’ll have prepared everything you need for when the tax filings are due. If you use a tax accountant, this will enable them to do your tax quicker, which in turn will save you money.
If you’re an employee, you’ll want to keep receipts for books, courses, learning resources, and other evidence of tax deductibles. For business owners, keep evidence of PAYG summaries, lump-sum termination payments, employee allowances, capital gains, dividends, and other sources of income on top of evidence of expenses for tax deductions.
Go a step further and scan receipts – especially those printed on thermal paper – so you have back-up copies in case you lose them, or the ink fades and they become illegible. (Found a faded receipt? Don’t panic as there are other ways to provide proof of transactions.)
4. Find out what you can claim
In order to stay organised and on top of your tax filing system (using the tax folder as suggested above), you will need to find out exactly what type of legitimate deductions you are able to claim.
For individuals, as a general rule, you can claim the following:
- Gifts and donations
- Home office expenses
- Interest, dividend and other investment income deductions
- Vehicle and travel expenses
- Self-education expenses
- Tools, equipment and other assets
For businesses, the general rule is that you can claim deductions for any costs you incur to run your business relative to your earning of income.
As long as you practice these tips, your tax time experience will not be as overwhelming as it used to be.