Simple Tax Tips for the Self Preparers

working day in office. two businessmen at work.

There are many facets to filing your tax returns and in spite of paying taxes for years, not many people are tax-literate. There are so many changes, regulations, opportunities or updates in the tax landscape and unless you are fully hooked into the latest updates, you are unlikely to know how to leverage the positives.

This is why some 74% of Aussies use a tax agent. Most people don’t even know the range of deductions and expenses that they are supposed to claim or the various offsets that they may be eligible for. Besides, hiring a tax agent or a professional accountant Melbourne doesn’t cost a lot of money so there is every imperative to use a professional to lodge your tax returns.

Still, some people opt to fly solo. If you do it right and have the time to work out all your tax details, this can save you some tax agent fees.

Here are some useful tips you can use to successfully prepare your tax returns and legitimately minimize your liabilities as a self-preparer:-

Claiming the Work-Related Deductions

Going after the work-related tax deductions and the entitlements may result in significant income tax savings. But you ought to know what to claim. Some of the common work-related tax expenses that you can go for include cost of computer repairs, union fees and professional subscriptions that you have not been reimbursed for and any work-related mobile phone and internet usage costs.

You can only claim a work-related expense if it satisfies the following conditions:-

  • You spent the money yourself
  • You were not reimbursed for the expense
  • The expense was directly related to the generation of your income
  • You have kept the records to prove the expense or you have a way of showing that the expense was incurred.

Make sure that your claims are valid. Currently, the ATO has the organizational arsenal to go after bogus claims so if you are not honest, you are likely to fall victim to the Australian Taxation Office’s audit blitz.

Claim your home office expenses

This is probably one of the most overlooked of expense claims. Whether you are working from home fully or partially, you are allowed to claim a home office deduction. The typical home office expenses that you can claim include lighting, heating, cooling and internet costs. If you have purchased some furniture or equipment in an income year, you can also claim for the depreciation in the value of these.

Ensure that you have kept records or a diary detailing the hours spent working from home. You don’t have to keep these for the whole financial year. Four weeks of records on your diary is sufficient to work out your home office expenses.

Self-education expenses

Are you currently enrolled in a course that is related to maintaining or boosting your current occupational skills? You can claim tax deductions for the expenses that you incur.

However, if you are studying to acquire new qualifications in a different field altogether, the costs incurred will not be tax deductible. Examples of self-education expenses include student union fees, course fees, stationery, student union fees and the cost of depreciation of assets used in your studies such as printers and computers.

The repayments for Higher Education Loan Program are also not deductible.

Depreciation Claims

You can claim instant deductions for assets that you have purchased in the current financial year which cost less than $300 if these assets are used in generating your income. Examples of such assets are computers, tools and equipment used by tradespeople, bags and briefcases or technical books purchased by an employee for use in their line of work.

If the assets cost more than $300 and they will be used in income generation, you can file claims for a tax deduction over a period of time. The tax deductions claimed are dependent on the value of the asset, the effective value of the asset as well as the extent to which you will use it to generate your income.

Make the most of motor vehicle deductions

If you are using your car for work-related travel, then you can file for claims in two ways. The first option is on a cents-per-kilometre basis which is applicable if your claims do not exceed 5000km. There is an allowable rate for such claims and it changes on an annual basis. Before you calculate your claims, make sure you obtain the most current rate for this year from the Australian Taxation Office or a registered tax agent. With the cents-per-kilometre claims, you won’t need evidence for substantiation purposes though the Australian Taxation Office may want to know how you arrived at the business kilometers covered in a financial year.

Where your business kilometers exceed 5000km, you will have to use the log book method to compute your claims for the work-related car running expenses. Talk to a registered accountant Melbourne for professional advice on what constitutes work-related travel.

It is also prudent to compare these two methods so you can figure out where you can make the most of your deduction claims.

Rental Property Deductions

If you own rental property that you are already renting out or plan to rent out, there is an array of tax deductions that you can claim immediately. These include:-

  • Agent’s commission
  • Advertising costs for tenants
  • Land tax
  • Body corporate charges
  • Gardening and property maintenance
  • Council and water rates
  • Pest control
  • Insurance costs
  • Leases including stamp duty, preparation and registration

As a landlord, you can claim an annual deduction on the reducing value of your depreciable assets such as the hot water system, carpets and various other fixtures. You can also claim for the capital works such as structural improvements and remodeling spread over the effective life of these renovations.

One deduction that is no longer available is the travel expense incurred when inspecting the property, carrying out property maintenance or collecting rent for your residential properties.

You can also claim for deductions for the depreciation in the value of plant and equipment for residential properties. However, these are limited to the outlays incurred by investors in residential properties. Landlords can only depreciate newly purchased assets for properties that have been recently acquired.

For clarity on the deductions that you can claim immediately or depreciate over time, you can talk to a registered tax agent or an accounting firm Melbourne practice.

Make the most of the tax offsets

Are there any tax offsets that you are leaving on the table? Tax offsets will reduce the amount of the tax that is payable and they can really add up to a tidy sum. Your eligibility for a tax offset is pegged on a number of factors such as the family circumstances, income as well as certain conditions. There are various tax offsets that you may be eligible for such as the senior Australians and pensioners offset, the low-income offset as well as tax offsets for the superannuation contributions you make on behalf of a low-income spouse.

Check on your cryptocurrency gains and losses

Cryptocurrency investments are currently the in-thing for those with a good appetite for risk so if you are into this, it is important to be cognizant of the tax consequences of the same. The tax implications will vary widely depending on your circumstances.

The Australian Taxation Office, for example, treats Bitcoin as an asset for capital gains tax (CGT) purposes. This treatment applies to all cryptocurrencies with the same characteristics as Bitcoin. If you are however trading in cryptocurrencies, the income that you derive from this is treated as an ordinary income.

Keep an eye on your superannuation contribution limits

Most people would want to make the most of their concessional and non-concessional super contributions but it is important to be aware of the new limits so that you don’t put in money over the super caps. The concessional contribution caps for 2017-2018 currently stands at $25,000 while that for non-concessional contributions is $100,000. This cap covers the super-guarantee, the salary-sacrificed contributions as well as any personal contributions that are claimed as deductions by those who are self-employed. When you make super contributions in breach of the caps, the extra contributions will be taxed at your marginal tax rate as opposed to the concessional tax rates of 15% for those within the limits.

Claim tax deductions for the super contributions

In the past, only the self-employed could claim tax deductions for personal superannuation contributions but the rules have since changed. Under the current rules, anyone that is aged below 75 is allowed to claim tax deductions on super contributions that they have made to a complying a super fund using their after-tax income.

However, before filing the claims, ensure that you have lodged a notice of intent before lodging your tax returns or by the end of the following income year. All the contributions for which you claim a tax deduction will factor into your concessional contribution limits. If you are an employer, you can also claim a tax deduction for the super guarantee.


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