Whether you file your return as an individual or a business, I’m going to hazard a guess that you don’t ever really look forward to tax time. It’s like asking people whether they look forward to the federal budget each year, sure it’s important, but no-one counts down the days in anticipatory glee.
So that you can make the most of tax time, I’ve put together a few helpful hints.
- Delay income where possible
If you’re expecting any further income for the remainder of this financial year, see if you can defer the payment date until after 1 July. Simply put off issuing invoices until the new financial year, or review your term investment maturity dates.
- Fixer upper
If you’re one of the growing number of Australians with an investment property or portfolio, you should seriously think about doing any repairs or maintenance before 30 June.
- Think Super
If you’re in a position to make any additional contributions to your super before the financial year ends, you could see a welcome reduction in your tax bill. If you’re self-employed, you may be able to claim your super contributions as a tax deduction. Just remember the yearly limits for contributions.
- The right cover
If you take out Life or Total and Permanent Disability (TPD) insurances through Superannuation, the tax benefits could make the cover more affordable than if you purchased it outside of your super. Plus, if you arrange Income Protection Insurance in your own name outside of Super, you can claim the premiums as a tax deduction.
- Rental Properties
There is a range of eligible tax deductions that can give property investors considerable tax benefits. The most widely known include expenses incurred in the existing financial year, such as interest paid on money borrowed or the payment of council rates, utility bills and various other costs involved in the maintenance of an investment property. It is not so widely known that it’s possible to prepay some expenses for a rental property and claim an immediate deduction.
- If you prepay a rental property expense
Such as insurance or interest on money borrowed (that covers a period of 12 months or less and the period ends on or before 30 June 2016), you can claim an immediate deduction for this in your 2014/15 tax return. If a prepayment does not meet these criteria and it’s $1,000 or more, the deduction claim may have to be spread over two years or more. This is also the case if you manage your rental activity as a small business entity and haven’t chosen to deduct certain prepaid business expenses immediately.
- The 12 month rule
If you are a small or medium entity, or an individual incurring deductible non-business expenditure, you can claim an immediate deduction for prepaid expenditure under the 12-month rule if the payment is incurred for an eligible service period not exceeding 12 months, and the eligible service period ends in the next income year. For example, if you choose to prepay your loan interest for the 15/16 financial year and you do so before 30 June 2015, you are eligible to claim the cost of the payment as a deduction in your 15 tax return.
- Bad debts
If you’ve got any outstanding debtors who you’re confident won’t be paying anytime soon, it’s best to write them off before June 30 and claim back the tax deduction.
- Think Super (as well!)
Even though Super guarantee payments won’t be due until July, if you pay these in June you’ll be able to take advantage of a deduction for this financial year.
- Asset write-offs
If your business is eligible, you’re able to write off any asset used as part of a business costing $1,000 or less immediately.
Seems simple but this remains the best way to write off any lost or damaged stock and reduce your taxable income.
Of course, you should consult with your accountant and financial planner to make sure the steps you take are appropriate for your particular needs.
Carolin Mackaway is the Greater Building Society's Greenhills branch manager.
Carolin has more than 13 years experience in financial services and is a long time Hunter resident.
She is also extensively involved in charity work in Cambodia and Nepal. She lived in Cambodia for 18 months setting up village banking as part of a Credit Union Foundation of Australia financial literacy program.