Tax time tips across the generations
TAX time is a little more than a month away. How should your generation prepare for it now?
TAX time is a little more than a month away. How should your generation prepare for it now?
GEN Y - Justine Davies
AH TAX - where would our politicians be without it? June 30 will roll round pretty quickly, so there are definitely a few things you should do right now, before it's too late.
1. Surf the ATO website: Boring, yes, but it could be a profitable way to spend half an hour one night as they have some useful information on what you can - and cannot - claim as a tax deduction. As well as giving a good overview, they also have a "deductions for specific industries and occupations" section. Depending on your career, you may be able to claim for items such as moisturiser, first aid courses, sunhats, electronic organisers, Pay TV access, fitness expenses, handcuffs and the cost of hairdressing.
2. Decide whether you should be pre-paying expenses: None of us have a crystal ball, but most of us should know whether our income this tax year is likely to be more, less or about the same in the year to follow. If your income and tax rate are higher this year than next, you may want to prepay some tax-deductible expenses and defer, if possible, any extra income so as to minimise the level of tax you pay right now. Or do the opposite if you're expecting a big payrise in July.
3. Check your thresholds: Check where your income sits in relation to thresholds including the net medical expenses tax offset, the low-income earners tax offset and the private health insurance rebate thresholds.
Do it now. Sure it's an hour or two of your time, but it could net you some handy cash.
Justine Davies is finance editor and commentator with financial research and ratings firm Canstar.
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GEN X - Bruce Brammall
DAMNIT! Too late! Why are we asking this question now? Should have asked this 10 months ago.
But, instead of planning for tax time throughout the year, we leave it to the last minute. Month. Whatever.
I know tax is not something you want to think about all year round. If you're not doing it right, it can be painful, like Meatloaf at the 2011 AFL grand final.
But it doesn't have to be. Just flip your thinking a little and tax time will become the most profitable two hours of your entire year.
Grab a shoebox. Put it somewhere that you'll regularly see it, like on a shelf.
Now empty your wallet/purse regularly and feed the box with receipts that you might be able to claim against your income.
What can you claim? Jump onto the ATO's website and search for "claiming deductions". Half an hour spent reading that website will probably surprise/annoy you with things you could have claimed for years. In particular, search for your occupation to find out if there are extra things you can claim.
Many can claim some car expenses, stationery, self-education, donations and travel expenses. But that's just the start.
Feed your shoebox before June 30. Pre-pay expenses and buy items that you are able to claim that you know that you'll need for the year ahead. If your affairs are more complex, hire an accountant. The few hundred dollars spent will usually be returned several-fold.
Bruce Brammall is the author of Debt Man Walking and principal adviser with Castellan Financial Consulting.
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BABY BOOMERS - Mark Bouris
MOSTof the panic around tax time happens because people wait until the last minute.
Then it becomes a mad dash to get everything done in time, which is when opportunities slip through the cracks.
To get the best out of tax time, you need to plan ahead. Here are some tips.
1. Income: Are you expecting any large amounts of income prior to 30 June? If it is possible to legally defer them until July, this would also defer the resulting tax payable.
2. Investment properties: Have you had a depreciation report prepared? Depending on the age of your property, this can result in extra tax deductions. Try to prepay your loan interest for the next 12 months before June 30.
3. Shares: Have you made any capital gains during the year? If you hold other shares in loss positions, you could consider selling before 30 June, crystallising a capital loss and lowering your tax payable.
4. Superannuation: Have you considered a transition to retirement income stream? If you are between 55 and 65, this may reduce your tax payable for the next year without reducing the cash you receive. Have you made the most of your super contribution cap limits? You may be able to make extra deposits and claim a tax deduction before 30 June.
5. Income protection insurance: Most policy premiums are tax-deductible.
Finally, make sure you have a good accountant. A professional will be able to give you the best advice based on your situation.
Mark Bouris is executive chairman of wealth management and advice firm Yellow Brick Road.
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RETIREES - Kerrin Falconer
FOR many retirees, tax time is a non-event because they are not in a taxable situation.
For many others, it is a stroll in the park because there is not much to do except add in a few numbers here and there.
However, for those who need the full Monty, hopefully it will be easy because over the year, you have filed all those income and deduction details regularly in a place where you can easily put your hands on them.
Then there is nothing for it but to start getting your hands dirty. Here are some tips to get you going.
Get out last year's return. This can be a good place to start because it can remind you of what income and deductions you have previously received and incurred. If nothing has changed much, then chances are income and deductions will be roughly similar.
Start with income and bank interest. Banks supply interest figures to the ATO, so they probably know before you what interest you have earned. Ditto for share dividends.
Move on to deductions. Ensure that your deductions are legitimate. It is not worth fudging a deduction, no matter how small.
Anything more than this and it is probably worthwhile leaving it to the experts, especially if there are trusts and/or family companies.
Tax laws change regularly and the professionals are paid to keep up to speed with the current legislation.
Retirees have better things to do with their time without having to worry about sorting out that shoebox.
Kerrin Falconer is a finance writer with 15 years of financial planning experience.