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As we get closer to tax time, you’re probably scrambling to get your receipts together, wondering how much of your hard-earned income you’ll be able to pry back from the government, and stressing about whether there’s anything you’ve forgotten.
While we can’t wave a wand and make all your finances fall into line so you can get an amazing return, we can help remove some of the stress from the process. Follow the five simple steps below, and you’ll find that tax season becomes a whole lot easier.
Know What You Owe
First and foremost, you need to be on top of what you owe the ATO. We suggest typing “tax calculator Australia” into Google so you can find an accurate tool to work this out. Employees on a PAYG salary will be able to get a rough idea of what impact their deductions will make, while those who work for themselves will be able to work out exactly how much tax they’re going to have to cough up once they lodge their return.
Don’t Forget About Passive Income
The main focus at tax time is usually on active income. However, if you fail to declare any passive income streams you have, you could be in trouble. For example, those with shares that pay dividends must declare their earnings, even if they’re fully franked. Any rental income must also be accounted for (even if it’s just that one piece of clothing you rented out a few times), and interest earned on any savings sitting in the bank is also taxable. However, you can earn a small amount of hobby income without being taxed.
If you’re unsure whether an income stream is considered taxable, fill your tax accountant in on the details. They’ll be able to help you accurately categorise every income stream, thus keeping you out of trouble with the ATO.
Work Out What You Can Claim
It often feels like you’re simply throwing money away when the tax office takes it from each paycheck. Thankfully, there are many things that can be used as deductions if they’re relevant to your profession.
Look at everything you have to pay out that is associated with either your employment or your business, then create a list of everything you think you can claim. By preparing this before meeting with your tax agent, you’ll be able to take a lot of the stress out of the appointment as you won’t have to worry about forgetting anything.
Stay on Top of Your Super
In Australia, there are special tax laws surrounding superannuation, so keeping on top of things in this department is vital. Any voluntary contributions you have made can have an impact on your tax bill.
If your super is self-managed, be sure to speak with your SMSF accountant before lodging anything to do with your taxes. This is the best way to ensure you’ve got the most accurate and up to date information.
Finally, although it’s a bit late in the year to start collecting your receipts for this tax season, getting on top of this activity now will make next year a whole lot easier. Paper records are a hassle to maintain, so we suggest digitising all relevant receipts and documents and storing them in folders marked for each tax year. That way, they can easily be accessed to calculate your deductions or provide to an auditor if necessary.
Hopefully, this article has helped you feel a bit better about the approaching tax season. Remember to be honest, and everything will be alright.
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