First, you need to collect all your records of both your income and your expenditure throughout the year.
This includes:
- All your income whether it’s from your employer, your super or your pension
- All your bank statements including interest earned and charges paid
- Dividends and distributions from your investments
- Records of investment sales and purchases for capital gains/loss purposes
- Income from rental properties and associated expenses
- Foreign income
- Your private health insurance policy details.
Nowadays, there may also be income to report from your participation in the shared economy such as money earned from Uber or AirBnB.
Ideally all this documentation should be to hand. If it’s not, then seriously consider using an app to record all these transactions on a regular basis so when June comes around, you won’t spend hours hunting out all the documentation. The Australian Taxation Office, for instance, has a myDeductions app for individuals and sole traders.
Another way to help monitor your expenses is to establish a separate credit card or bank account for your work-related expenses so that they are easily identifiable.
What can you claim?
Once you have your documents to hand then you need to consider what you can claim as work-related expenses. But do make sure you only claim what you are entitled to, because the ATO has work-related expenses in its sites this year.
Basically there are three key criteria:
- You must have spent the money yourself without having it reimbursed
- The money must be directly related to earning income
- You must have a record to prove it.
If your expenses meet these criteria, then there are a host of expenses you may be able to claim. These include vehicle and travel expenses; clothing, laundry and dry cleaning; gifts and donations; home office expenses; self-education; bank interest and account fees; and tools and equipment.
As an investment property owner, you can claim items such as land tax, rates, body corporate charges, insurance, repairs and maintenance, agent’s commission, gardening, pest control, costs associated with drawing up leases and advertising for new tenants.
If you have income protection insurance outside super, then tax time is a perfect opportunity to review your cover and maybe prepay your next 12 months of premiums. That way you can claim those premiums as a deduction in the current year and reduce your tax liability. Other types of life insurance are generally not tax deductible outside of super.
Check your super
Superannuation is another area for attention. If you have not reached your concessional contributions cap of $25,000 (which includes your employer’s contributions and salary sacrifice amounts) then consider putting the shortfall into your super. Any personal concessional contributions you make can be claimed as a tax deduction. But don’t wait until the 11th hour as your contribution may not be processed by the fund until after June 30. You will need to notify your fund of your intent to claim a deduction and there are applicable timing requirements for this notice.
Taking advantage of the government’s co-contribution can also be worthwhile for those who are eligible. If you earn less than $37,697 in 2018-19 and contribute $1,000 to your super as a personal contribution for which you don’t claim a tax deduction, the government will match it with a $500 co-contribution. That’s an effective 50 per cent return on your investment.i The co-contribution reduces progressively to nil once your income reaches $52,697. You must meet the eligibility criteria to qualify.
Changes for inactive super accounts
It is also worth noting that come July 1 your super fund will cancel your life insurance policy if no contributions or rollovers have been made to your account in the last 16 months. If you want to maintain insurance cover with such a fund, you need to contact your fund or make a contribution or rollover into that fund to keep your account active. Alternatively, you could speak to us about purchasing cover outside super.ii
If you would like some help making tax time less taxing this year, speak to your tax agent or give us a call.
ii https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/insurance-through-super