With the Australian Taxation Office revealing it will speak to more than 350,000 taxpayers this year in a bid to crack down on dubious tax returns, it is now more important than ever to understand exactly what can and cannot be claimed.
Planning ahead can help taxpayers maximise their refund and ultimately end up with more money in their back pocket.
Those who start thinking about their tax return before the end of the financial year often end up getting the most money back.
Simple things like knowing your budget and whether or not you can afford to pay for certain expenses before 30 June, thus increasing what you can claim, can help taxpayers to grow their overall refund.
With an increasing number of taxpayers submitting their tax return online these days, it is important to know what you can do in order to maximise your refund. Those who don’t know exactly what they are able to claim can end up short-changing themselves.
To help Australians prepare for tax time and maximise their refund, Mortgage Choice has created five steps that all taxpayers can follow:
Step 1: Lodge early
While you might be dreading going through the paperwork and receipts for your tax return, the sooner you start the process, the better off you will be. Instead of allowing your tax refund to accrue interest in the Australian Taxation Office’s coffers, complete your tax return early and let your refund boost your bottom line. You can use your tax return to pay off your credit card (thus saving you from paying high interest charges) or put it into a high interest savings account.
Step 2: Get private health insurance
Singles with a taxable income of $90,000 or more and no private health cover, will face a Medicare Levy Surcharge (MLS) – which can be quite costly. If you don’t have private health cover and you currently earn $90,000 or more, taking out private health insurance now will help you to decrease the surcharge you have to pay. Better yet, provided your health cover is continuous, you will be able to avoid paying any surcharge in the next financial year.
Step 3: Boost your superannuation
Salary sacrificed super contributions are taxed at 15%, which is likely to be lower than your marginal tax rate. And, because any super contributions come out of your before-tax income, they are not counted as assessable income for taxation purposes. This is a simple way to save on tax and build your wealth, as more of your income is put towards growing your superannuation.
Step 4: Claim against your investment property
Many property investors don’t realise they can claim for a range of expenses on their property, including but not limited to: agents’ fees, body corporate fees, advertising for tenants, building maintenance and repairs, cleaning costs, insurances, home loan fees, interest payments, council and water rates, the cost of traveling to and from the property for inspections, and depreciation deductions for the property. Making sure every possible claimable expense is claimed at tax time can help you to grow your overall refund. Of course, given that there are so many different claimable expenses available to property investors, it is worth speaking with a professional to make sure nothing is missed.
Step 5: Take out income protection
Income protection insurance is a claimable tax deduction. So if you already have a policy and can afford to pay your premiums for the next 12 months in advance, doing so before July will mean you are able to claim the cost as a tax deduction for the 2014/2015 financial year. It is important to note however, that income protection insurance is not deductable if funded through your superannuation.
For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711.