Let’s take a look at 15 tax tips that will help you drastically trim your tax liability, while at the same time being legitimate for the year 2016-2017:
1. State deductions related to your work: Stating work-related deductions can help you save a considerable amount of tax. The most common expenses related to work are inclusive of work telephone, your mobile phone, and usage of the internet, any damages and thus repairs to computers, union dues and subscriptions. The Australian Taxation Office (ATO) is checking all your claims instantaneously. Make sure you make the right claims for which you have appropriate backup to support your entitlements, including credit card bills and receipts.
2. State your office expenses within your home: When you have created a workplace within your home itself, home office deduction can be granted to you. These costs typically include cooling, heating, lighting and the depreciation of office equipment. In order to claim this expense, you need to have a diary specifying how many hours you have done work at home, and this should be done for at least 4 weeks.
3. State expenses of self-education: If you take classes to enhance your current knowledge of the work that you are doing or you are trying to increase your income by expanding your knowledge, you can claim self-education expenses. However, if you gain knowledge or qualifications in a completely different field of study, these expenses cannot be incurred. The usual self-education expenses are inclusive of textbooks, stationery, fees of the course undertaken and depreciation of much of the assets including computers, printers, scanners, and tablets.
4. Claim the depreciations: You can claim immediate deductions for any asset that cost you under $300. These assets may comprise different kinds of tools for calculators, briefcases, computers, computer equipment and much more. Any asset that costs more than $300 which has been used actively for generating income can be used as a tax deduction. The total of deductions, however, vary greatly from one asset to another. It depends on factors such as asset’s value, its life and to what extent it can be used for income-generating purposes.
5. Increase your vehicle deductions: So you are using your vehicle for work purposes, then, by all means, you can claim for motor vehicle deductions. In fact, this can be done in two ways. If you claim a travel expense that does not exceed 5000 kilometres annually, then you can claim the expenses for your vehicle on cents-per-kilometre basis. This rate changes annually, thus it is extremely important to check the year’s claims from the ATO. If, on the other hand, your travel claim does exceed 5000 kilometres, you need to have the log book method to be able to claim the deduction for total vehicle expenses.
6. Deductions on rental property: Any owner of a rental property can claim deductions immediately for many expenses, which includes land tax, leases, gardening, insurance, pest control, repairs and maintenance and much more. Landlords can also receive deductions for depreciable assets which include stoves and hot water systems and also receive deductions for capital works for other enhancements like renovation of a bathroom.
7. Non-residents and residential property: The government has announced that Australia’s foreign resident capital increases will be further prolonged to deny access to foreign or temporary tax residents, from 9th May 2017.
8. Increase tax offsets: Tax offsets directly helps to reduce your tax payable and adds up to a sizeable amount. However, your eligibility depends greatly on the income, circumstances of your family, and situations for certain tax offsets. Taxpayers need to check if they are eligible for tax offsets which include low-income tax offset, offset for superannuation contributions done on behalf of the spouse on low-income and the senior Australians and pensioners offset.
9. Delay income for higher income earners and bring forward the deductions: The highest marginal tax rate which is 49% will decrease to 47% in 2017-2018, with the elimination of the temporary repair levy for individuals getting taxable income more than $180,000. Individual taxpayers who are in this bracket of tax may want to delay their income until 2017-2018, as they would have to pay lower income. However, extra care must be taken in order to make sure that any breach of anti-avoidance provisions is not done.
10. Superannuation: The changes being made to superannuation in the past 12 months require one to take extra care. You will want to make the allowed maximum concessional contribution before the reduced version of $25000 per annum starts from 1st July 2017. These concessional contributions consist of any kind of contribution that has been done by your employer, personal contributions or salary cut amounts. If you plan on giving extra contributions to your concessional cap, the excess contributions will have to be taxed, but you can have the excess contributions refund back from your super fund.
11. Self-employed tax-effective superannuation contributions: A self-employed can claim contributions to a complying superannuation fund until the 75 years of age in the 2016-2017 tax year. Nevertheless, these contributions will be deductible if it is less than 10 percent of the total income of the person, reportable fringe benefits are assigned to their status as an employee. Employers can even claim deductions for their employees.
12. Take into consideration the superannuation co-contribution: Any individual who earns less than $51,021 in the tax year 2016-2017 must consider making some kind of after-tax contribution to their superannuation in order to successfully get qualified for the superannuation co-contribution. The government is going to match the after-tax contributions 50 cents for every dollar which contributes up to a max of $500 for every single employee who is earning up to $36,021. This eventually decreases for every dollar of total income over $36,021 to nil at $51,021.
13. Combine your super: Most employees believe that having their entire super in one place is the best thing one can do. This will greatly help to lessen the amount of fees you’ll have to pay, receive just one pack of paperwork and you’ll have to take account of only one fund. This is why you need to consider combining all your super funds into one. Compare all your existing funds to find out which one will work the best for you. Some things that you need to consider are your charges and fees, your available options of investment and life insurance cover. Once you have selected the fund of your choice, get in touch with the provider and they can assist you to transfer money from your other super funds.
14. Evaluate your superannuation income stream: You have to transfer all excesses to your accumulation fund or eliminate it from your superannuation before the 1st of July. You may have a self-managed superannuation fund (SMSF) wherein one of your members will be extending their transfer balance cap, the fund will not be able to separate the assets for tax purposes. If you are thinking of any investments, seek advice before making any decisions from the CPA Australia-registered tax agents.
15. Review all your salary sacrifice arrangements beforehand: Employees can also take into consideration their salary sacrifice arrangements. Moreover, a 20% rate applies whenever a motor vehicle fringe benefit is calculated using the statutory formula method. Furthermore, employees who make use of a car for work purposes will be able to receive tax savings by calculating the FBT paid on the car. Again, ask for advice from a CPA Australia-registered tax agent whilst reviewing salary sacrifice arrangements and to see if they are tax effective.
These are just 15 specific tax tips. If you’d like my list of 240 possible tax deductions, simply visit www.taxdepot.com.au and go to my Taxation page to download. Of course not every item is suitable (or allowable) for every business, but contact me on firstname.lastname@example.org and I’d be happy to talk to you about your tax and business financial management needs.
7th August Payroll Tax
14th August Payment Summary statements are due to the ATO
*For those dates above which have passed, so be sure to action urgently if not already completed.
At Tax Depot, we service Logan, Springwood and Beenleigh clients in all areas of taxation, tax planning, bookkeeping and business accounting services. If you need assistance or advice from our CPA qualified accountants, call us today on 1300 722 955 / (07) 3133 3752 ; we would be only too happy to discuss how we can help you and your business.
Noel Ryan BCOM CPA