How thinking about your tax now can pay dividends in June

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Ahh, Easter. The time of the year when many of us spend time with family, take some time off and pretend that because the chocolate is hollow, it’s OK to eat two to three times more of it. Coincidentally, it’s also about two months away from the end of the financial year, so you know what that means – it’s time to start thinking about your tax, baby!

If this isn’t an exciting prospect for you (I can’t imagine why), that’s completely understandable. Unless you’re an accountant, the end of financial year is something many of us try to avoid thinking about, with our tax returns often something we get around to in October when we realise the deadline is approaching.

Don’t approach your tax on autopilot.Credit: Aresna Villanueva

In fact, a survey from 2022 found more than half of us view tax time as stressful, with a similar amount saying they spend over five hours a year managing their taxes.

What’s the problem?

However, that same survey revealed 54 per cent of us don’t think we’re claiming all the deductions we could be entitled to, with much of that discrepancy boiling down to a lack of preparedness and knowledge. Taking the time now (post Easter egg gorge) can literally pay you dividends come June 30. And it won’t take that long, I promise.

What you can do about it

Here are the best ways to get prepped for the end of financial year:

• Work-related deductions: Depending on where you work, there are a bevy of work-related deductions you can make (the ATO has some helpful guides here), and now is the perfect time to think about any purchases you could make before June 30, says Jenny Wong, tax lead at CPA Australia. “This could include work clothing or footwear, a computer desk, tools or anything else that’s essential for your job,” she says. “Just so long as you paid out of your own pocket and have the receipts, you can claim.” It’s also a good time to start tracking down any receipts for past purchases that you’re intending to claim, along with your logbook for any work-related car use. However, Wong warns not to get carried away when it comes to claiming deductions, as the ATO is well-equipped to sniff out any dud claims. “The ATO uses data-driven profiles based on employment type and financial investments to identify where some taxpayers may be pushing the boundaries of what they’re entitled to claim. Exaggerated claims could stick out like a sore thumb,” she says.

• Don’t get caught out: Each year, the tax office highlights some areas of focus for ensuring compliance, basically as a little warning for taxpayers who might be – intentionally or otherwise – doing the wrong thing. H&R Block’s director of tax communications, Mark Chapman, says one of those areas this year is investment properties, with the ATO eyeing off excessive interest expense claims, holiday homes that are not genuinely available for rent and incorrect claims for newly purchased rental properties. “For example, the costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately. These costs are deductible instead over a number of years,” he says. “The golden rule is; if you can’t substantiate it, you can’t claim it, so it’s essential to keep invoices, receipts and bank statements for all property expenditure, as well as proof that your property was available for rent, such as rental listings.”

• Incur some losses: Might sound weird for a money advice newsletter to advise you to lose money, but there’s a good reason for it. If you know you’ll need to declare a capital gain on your tax return this year, Chapman advises looking at your portfolio and consider disposing of any assets which you know are sitting at a loss. The resulting capital losses can be offset against the capital gain.

• Make a super contribution: If you want to make a tax-deductible (concessional) super contribution, you’ll need to get in early, as many funds have a two week-ish cut-off before June 30 to ensure they’re processed in time. Just make sure the total amount of your contribution, including those made by your employer, does not exceed $30,000.
• Avoid autopilot: Finally, Wong says the one thing you should focus on doing this tax time is avoid going on autopilot, which she says can cause people to miss out on easy deductions, or input incorrect information. “Switch off autopilot and take time to seriously consider what’s different about your work-related expenses this year and think about what you could claim,” she says. “Maybe you travelled more for work and were not reimbursed by your employer for meals or other travel essentials. Or maybe you started a new job where you had to pay for security clearances or a blue card, for example.”

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.