That time of year is approaching quickly when we must all file out tax returns. It's guaranteed that you will have to pay your taxes, but not necessarily that you will receive a refund. Do you know all the various ways to beat the taxman at his own game, legally? Today I'll take a look at some of the tricks of the trade to help you increase your returns.
Doing your taxes isn’t simply about keeping your receipts and a log book, it’s more about knowing what is claimable in the first place. You may not be able to claim your rent or an entire phone bill, but there are plenty of other legitimate ways to increase your returns - some of which we'll be exploring here today.
Private Health Insurance
High-income earners could save much more money by prepaying for their health insurance. Those who currently receive a 37.82% rebate on private health insurance premiums should know that it gradually fades out once you earn over $90,000 per year (single) or $180,000 (couples). If you are currently sitting under this threshold but believe that you might earn above this during the 2016/17 financial year, you can still get the rebate paid in full if you prepay 12 months of the premiums before July 1st 2016.
If you have a small business then this is a great little technique to get some extra cash into your pocket. If you have bought or a planning to buy a new business asset that is under $20,000 then you want to claim the tax deduction this financial year. This is because you can immediately write the purchase off, as long as it’s under $20k. This is one of those great tax concessions that have been made available to small business (turnover under $10 million).
Additionally, there is no limit to the amount of assets a business can buy under this concession, but as expected there is a catch. Firstly your company’s cash flow may suffer if you go on an asset-shopping spree. Also if your business is registered for GST then you can buy a business asset for $22,000, claim the 10% GST credit and get an immediate write off for the balance of this years asset purchase.
Home Office Equipment
The bad news is that you can’t buy a new laptop, PC or printer and claim it as a tax write off, but you can claim the depreciation on the item for each year. People working from home can also save money by reclaiming on costs incurred from running a home office. Modern company rules mean that many more of us are working from home on a flexible basis, but not all of us are aware that we can be claiming deductions for the costs of doing so. Even if you have a room at home that isn’t solely set aside for work related purposes, you can still claim.
Deductions are available to those portions of the home telephone that are used, Internet, stationary, computer equipment and printers too. The best way to accurately claim is by keeping a diary on the amount of hours that you work from home, so you can claim 45¢ per hour on electricity and gas as well. On top of this, you can also add the depreciation of home-based furniture to your claims.
Hardware and Software
Those of you who do work from home position yourself in a much better stance if you buy new hardware at the beginning of the financial year rather than at the end, because it increases the amount of depreciation you can claim.
Regarding software, it’s important to claim on things such as virus protection at the end of the year. Whilst for hardware, this could include things like printer cartridges. So our advice would be to go shopping sooner rather than later for these sorts of items.
This money saving tip isn’t only for homeowners, in fact it can be done against most investments. You have the potential to minimise your capital gains tax (CGT) simply by deferring the sale of, or offsetting losses against, the gains already made on that investment.
A good example could be the stock market which had a very turbulent time during the 2015/16 financial year. If you made a capital gain or two earlier in the year then you would be able to reduce your CGT by selling any badly performing stocks that you may be currently holding.
The smart way to do this is to sell all unrealised gains after 1st July so you can defer the tax for another year. Additionally, if you have held the stocks for longer than a 12-month period, you could reduce your CGT by over 50%.
A large number of the population might not know about the free money service offered by the government, which is more commonly referred to as the super co-contribution. If your income is $35.454 and you contribute $1,000 after tax into super then the government will match 50¢ to every dollar.
The policy does fade out for those earning more than $50,454 but at the end of the day, if you are in this bracket it’s free money which you could be taking advantage of.
Did you know that there is a way for your spouse to receive a rebate easily too? If you are earning under $10,800 your spouse can put $3,000 into a super fund for you and in return they will receive an 18% rebate ($540) on tax via the spouse super contribution rebate.
If you are fortunate enough to own a property that you rent out then it’s important to know that there are additional ways to claim money for activities associated with this kind of real estate. Save some extra cash by claiming for things such as mortgage fees, travelling to inspections, agency fees and loan application fees.
Claiming on travel to inspect a property is a great way to save money, but don’t include a holiday to those expenses because the taxman will pick up on that and it will be frowned upon. Driving to inspect a house is completely ok, but inspecting your house on the Gold Coast when you live in Sydney and taking the kids with you for 7 days will raise suspicions. Do not expect the taxman to deduct the entire trip.
If you can bring your expenses forward, this is an ideal way to increase the extra amount of cash you have in your pocket. This is especially true if you expect your salary to decrease in the next financial year. By bringing some of your 2016/17 taxes into this financial year you can also bring forward the deductions too.
A reduced income next year can be related to a variety of issues e.g. maternity leave, redundancy, a smaller bonus or even cutbacks to your overtime hours.
These are some of the best ways to increase the amount of rebates you receive, but ultimately it will depend on each individual. But, for those looking for a quick way to increase their deductions before the end of this financial year, you can consider stocking up your home office with stationary, buy new laptops and printers or prepaying subscription and interest in advance for 12 months on things like health insurance and software subscriptions. Don’t forget, you have until June 30th 2016.
If you would like to find out more areas in which you can increase your rebate, here are a few other articles we have written, such as:
- Tax Rebates Checklist
- Pay Less Tax: Part 1
- Pay Less Tax: Part 2
- School Tax Breaks
- Most Under-claimed deductions