The end of the financial year is just around the corner. That means you don’t have long left to maximise your tax deductions for your annual income tax return.
Maximising your tax deductions makes good financial sense. Tax-deductible expenses help to reduce your taxable income and therefore the amount of tax you need to pay.
Tax-deductible expenses must be directly related to earning your income and not include any expenses that are reimbursed by your employer. They can include:
Vehicle and travel expenses. However, you cannot claim travel to and from your home and work, nor can you claim car expenses unless your vehicle is specifically required for your job. If you’re eligible to claim work-related vehicle expenses, you generally need to keep logbook driving records of your travelling.
clothing, laundry and dry-cleaning expenses (part of compulsory work uniform)
gifts and donations
home office expenses (if you work from home).
interest, dividend and investment expense deductions (such as fees charged by financial institutions on any income you have earned).
self-education expenses (if there is a connection to your current employment)
tools and equipment under $300 (tools and equipment with higher values can be depreciated instead).
repairs and maintenance on an investment property. However it’s important that you don’t confuse non-deductible capital improvements to an investment property with tax-deductible repairs and maintenance.
other work-related expenses (such as union fees or subscriptions to professional associations, or the cost of attending work-related seminars, conferences or workshops).
the cost of managing your tax affairs
It’s important to keep receipts of any expenses you’ll be claiming as tax deductions in case you’re ever audited by the Australian Taxation Office (ATO). These records must be kept for at least five years from the date you lodge your tax return.
Make sure you don’t over-inflate your tax-deductible expenses. The ATO is always on the lookout for unusually large claims. There are penalties for deliberately providing misleading information regarding your expenses.
Also, don’t leave your compiling of records to the last minute. You’ll inevitably forget something and end up paying more tax than you need to as a result. It’s best to develop a system and get into a record-keeping habit for your tax-deductible expenses, where that be in electronic or paper-based form, or both.
Whether you’re compiling your tax return yourself or using the services of a tax agent/accountant, it’s important that you have all your financial information as organised as possible.
How we can help
At Create and Protect Financial Planning, we can help you to maximise your tax deductions and to plan your affairs tax-effectively and. We’ll take the time to understand your needs and goals so we can provide you with the best possible advice.