The end of the financial year is coming, and so too is that one thing everybody dreads doing – their tax return. Even though your tax return isn’t due until 31 October 2015, you may need to act now to implement some of our tax reduction and wealth building strategies outlined in this newsletter. Make sure to pay attention to the items that require action in early June to meet the 30 June 2015 deadline, they may involve giving your HR department enough notice to take action.
Income tax preparation
When reviewing and preparing your income tax position for the 2014/2015 financial year we suggest you take into consideration the following four points:
1. Claim all deductible items
There are numerous expenses you can declare on your tax return that will reduce the amount of tax you pay. The most common tax deductions are work related expenses and charitable donations. Work related expenses are purchases made in the process of earning your assessable income. You can claim up to $500 of work related expenses without needing a receipt (unless a single expense exceeds $300), however, we advise that you keep proof of all purchases where possible.
2. Offset capital losses against your capital gains
You can also deduct any of your capital losses against your capital gains to reduce the amount of tax payable. For most people a capital gain will occur when they sell shares or property. If, at sale, these assets are worth less than when they were purchased then you can reduce your taxable captial gain for that financial year by the amount of the loss.
3. Review your investments
End of financial year is a good time to review how your investments are going and evaluate if they are performing to expectations, especially if you have recorded a capital gains loss in the current financial year. In some cases it may be appropriate to sell off an under-performing asset and realise a capital loss to potentially reduce the amount of tax you pay. You can use the money from that sale to invest in a new asset that is likely to grow going forward.
4. Plan for accessing your First Home Saver Account funds
The First Home Saver Account (FHSA) scheme was an initiative that helped first-time home buyers save money for a home with the incentive of government rebate. Even though the scheme was scrapped, the money in those accounts remained locked away until the end of the 2015 financial year. When your FHSA funds become available on 1 July 2015 you should update your savings plan, and consider withdrawing your entire balance and investing it in an account with higher interest earnings. When the FHSA scheme was first implemented there were restrictions on how you could use the money, however, from 1 July 2015 you are free to use the money for anything you wish.
Lodging your return
When it comes time to lodge your tax return you may be able to do it online using the government’s myTax or e-Tax software. To do this, you will need t
- go onto the ATO website and create a myGov account
- download the relevant tax program (if you are claiming a capital gains loss you will need to download e-Tax)
- link your myGov account to the ATO through the tax program.
Once set up you may find that lodging your tax return online is easier. Also, you will receive your tax refund faster (usually within 14 days) than if you lodge your tax return through the mail.
Click here to download our EOFY Newsletter as a PDF.
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