Regardless of any tax benefits that may flow to you from participating in certain investments and structuring the way you receive your income on a day-to-day basis, there are a few fundamental and simple tax reducing steps you can take.
Check permissible tax deductions
The most fundamental step you can take is to make yourself aware of all the permissible tax deductions that relate to your job. Some examples of deductions include the cost of toys for nannies, black suits (but not shirts) for funeral directors, calculator batteries for draftsmen, safety boots for doctors, the depreciation of television sets and anti-VDU-glare tinted glasses for advertising executives, and self-education expenses for students studying in the same field they are working in.
The way to find out what work-related expenses you can claim is to speak to an accountant, to a representative of your union or industry association, or to someone in your company’s accounting or personnel department. The other place to make inquiries, of course, is at the Australian Taxation Office (ATO).
Keep good records
Making sure you record all your expenses properly and having adequate proof of incurring them are both fundamental to good tax management. In the likelihood of undergoing a desk audit – where you get to meet very inquisitive representatives from the Tax Office face to face – make sure you can verify whatever work-related expenses you have claimed as deductions on your tax returns. If your records are inadequate and you can’t substantiate your claims, you may have to pay additional tax and a penalty. In more serious cases, you can be prosecuted.
If your total claims are $300 or less, you must keep a record of how you worked out each of your claims. If your total claims are more than $300, the records you’ll need are receipts, invoices or similar documentary evidence. Cheque butts are not acceptable. Whatever you do, make sure you keep your records for five years from the date you lodged your tax return. This is the period stipulated by the Tax Office.
Consider some strategies and investments
There are a number of worthwhile tax minimisation strategies and preferentially taxed investments available to everyone, no matter what your occupation is. These include:
• Income splitting
• Income timing
• Negative gearing
• Franked dividends
• Superannuation and managed investments in retirement
• Offset accounts
Get to know more tax minimisation strategies with the help of Gala Tax & Accounting Services today!