Tax season is right around the corner and for many of you, it comes with plenty of frustration and anxiety. Here are our 7 tips, that’s right only 7 which will ease those feelings.
1. Know your income
Get your s#@t together BEFORE 30 June!
This gives you an idea of your taxable income and therefore your tax position. If you look at your last payslip this will show your YTD income and tax withheld.
We can help calculate your tax on this income, and see if enough tax has been withheld from your pay to put you in a tax payable or refundable situation.
Don’t forget that JobKeeper payments are included in your taxable income, especially if you’re a contractor.
Start thinking about what other income you may have received during the year e.g. interest income, dividend income, capital gain if you sold any shares or property.
2.Working from home
WFH is the abbreviation of the year. What does this mean from a tax perspective? All the home office deductions.
Provided you use them for work, you can claim a % of home internet, home office equipment (desk, chair, computer, other electronics) and home office running costs – either based on your actual running costs of electricity and gas or using the ATO fixed rate.
Note that the ATO fixed-rate and shortcut method are different. Fixed-rate is $0.52 per hour you work from home relating to a decline in home office furniture, electricity and gas.
The shortcut method only applies from 1 March 2020 and covers all home office expenses including phone and internet. You can only use the shortcut method if you are fully working from home, not just carrying out minimal duties e.g. flicking through emails.
3. Go through your bank statements
We can’t remember what we did last weekend let alone last year!
Download your bank account and credit card statements into excel, and sort through these by contact name (so you can delete all the Netflix and Uber Eats payments first – not deductible ha).
This will allow you to find work-related expenses or donations you may have forgotten about, and then check your email inbox for a related receipt. If you can’t find one, call up or email the supplier as most of them will have it on file.
4.Take photos of your receipts
You need to keep documents for five years from the date you lodge your tax return. That’s too much paper floating around the house that Marie Kondo would not approve of!
Take photos of your receipts and upload them to Dropbox or a Google Drive folder labelled with each tax year.
You might even get into the habit of doing this throughout the year so everything’s waiting for you on 1st July!
5.Set aside money for your tax bill
Do you have a side hustle?
Did you make a nice profit on selling those shares? Did your employer not withhold enough tax for your HELP repayment?
It’s not fun news but instead of being in denial, be proactive about your tax debt.
Prepare your tax return as soon as possible, and then start saving. Set up a separate (fee-free) bank account and transfer little by little. If you lodge your tax return with an accountant, you will most likely have until June 2021 before your first payment is due.
6. Stop procrastinating
We know it’s hard to do life admin. Especially tax-related life admin.
But the tax refund is better in your pocket sooner. You can save it, invest it, put it into super, buy that ergonomic chair for your home office (hello 2021 tax deduction).
Or as mentioned above, you can stop being in denial about what your tax bill is going to be and start getting on top of it.
Either way, it’s empowering and oh so satisfying to tick off your to do list.