I was reading an article regarding tax deductions and how much tax we should pay. Did you know the average Australian is paying 110 percent or their taxation obligation!
When I heard that, I thought to myself, why? I suppose most people don’t know what they can claim and what they can’t. And rather than take a risk, they err on the conservative side.
A friend of mine put the whole thing into perspective for me when she said “Tax is optional”. What that means is that we can legally minimise our tax payable by understanding what we can and can’t claim.
This is choice WE make, not the tax department. They will not tell you what you forgot to claim when you lodge your tax return; it is up to you and your accountant to work out your correct obligation.
So the first step is to get yourself educated. Find a good tax accountant that can give you valid and current advice. Then learn as much as you can about what is a legitimate claim and what is not so you can increase your return.
Some people don’t realize that reducing your tax payable is one of the most profitable things you can do in your business. You don’t have to work any harder, you don’t have to sell any more products – and the best part is that every cent you save is TAX FREE!
Here is your starting point. I was discussing this issue with a friend and client of mine, Lu Colombo from Centum Wealth. I asked him to put together a basic list of the most common, but sometimes the most forgotten tax deductions. You can use this as a guide to make sure you are on track and not one of those people that love to overpay their taxes – I can think of better charities to donate the money to.
17 Tax Deductions You Should Be Considering Before You Lodge Your Tax Return For 2005:
We’re all looking for that elusive (and legitimate) tax deduction (or rebate) that will return us a reasonable refund at the end of the tax year. The ATO tries its best to discourage us from claiming deductions but if they’re there, in the law, and we’re entitled to them why not claim them.
Here are 17 tax deductions and rebates that in their own right may not seem much but once you add them up could amount to a tidy sum.
1. Salary packaging: These items are exempt from Fringe Benefits Tax (FBT) and you get the added benefit of claiming depreciation, where correct invoicing protocols are followed. Laptop computers PDAs Briefcase Mobile phones?
2. Salary sacrificing into Superannuation: the earlier in the financial year this commences the greater the benefits. And with the end of the super surcharge it becomes a more effective strategy.
3. Salary packaging motor vehicles: Whilst FBT is payable they are ‘concessionaly’ taxed.
4. Superannuation Co-contributions
5. Superannuation contributions on behalf of low income spouse
6. Required to work away from home, interstate or overseas? Claim the maximum prescribed daily allowances.
7. Are you getting the most out of your rental property deductions? 2 percent or 4 percent building write-off Depreciation claims and rates Repairs Vs. capital Interest and borrowing costs.
8. Making the most of dividend imputation credits.
9. Medical expenses rebate for expenditure over $1,500: Apart from doctors costs you should consider, dentist, pharmacists, physiotherapists, chiropractors? Etc.
10. Are you unnecessarily paying Medicare surcharge?
11. Are you getting the benefits of the Simplified Tax System (STS). Do you qualify and is it appropriate to your business.
12. Small business capital gains tax relief on sale of a business (or part).
13. Claiming the cost of insurances. Who should be paying your life policies, income protection, trauma.
14. Does your business have stock at year end? How do you value the stock to ensure you pay the least amount of tax?
15. Are you claiming your (and your employees) meals.
16. FBT and income tax exemption for minor and in-house benefits.
17. Superannuation contribution deductions for company directors who are not employees of the company.
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