Record keeping to maximise your tax deductible expenses
Many people find tax time a bit of a chore - particularly those who haven't been keeping orderly records of their comings and goings. Hunting down receipts and ensuring log books are up-to-date at the end of the financial year can be a pain. Yet, if saving thousands off your tax bill each year is not incentive enough to get organised for next year then what possibly could be? Here are some tips on how to go about it.
Good records, log books and suporting receipts can significantly reduce your tax bill at the financial year's end and may even help you get a wad of cash back from the tax office. Firstly though, you need to work out what you can claim so you know which receipts to keep and which receipts to throw away.
Tax deductions - what to claim
There are many deductions that you can claim for expenses incurred while performing your job but, to support your claim, you need to make sure you have the receipts to prove the purchase or, if this is not possible, you will have to keep written records, such as log books or expense diaries. Some work-related expenses you may be able to claim as tax deductions can include:
- Self education - for example, if you've moved into another area at work, like public relations, and decided to brush up your skills with a postgraduate degree
- Travel and car - this applies to those using their vehicle between jobs while at work, though not from work to home
- Clothing - particularly for those who must wear a uniform or specialist clothing to do their job, and or if much laundering and dry cleaning is required for your gig
Other typical deductible expenses can include donations to charities, payments to a private health insurer and health-related costs (for those over a certain threshold).
It's also worth noting that if you're 31 and don't pay private health insurance, you can expect to pay an extra one per cent income tax, known as the Medicare Levy Surcharge, at tax time. This can equate to between $500 and $1000 a year, money wasted that could, instead, have been used to buy your cover and give you some benefits! Plus, the Federal Government gives you a health rebate of 30 per cent of your insurance costs. Something to think about.
You can also claim for the decline in value of depreciating assets bought for work purposes, such as a laptop, tools or equipment. The decline is worked out on the basis of an item's effective life over time, based on a sliding scale. In addition, if you have an investment, such as a rental property or shares, deductions can be claimed for costs related to holding or acquiring these assets. The types of expenses you can look at claiming might include fees for a financial planner to get you started with a share portfolio through to to repairs needed on an investment property.
Record keeping for tax purposes
Deductible expenses that are specific to your job might not be obvious to your accountant so get advice then apply it to your situation. Have a think about what you spend as a work-related expense and keep a record. For example, flight attendants can claim items such as re-hydrating moisturisers, hair conditioners, shoes and hosiery worn as part of a uniform. Performing artists can usually claim such things as coaching costs, agent fees and photographic portfolios as long as they earn above a set amount in income from their profession. There are also deductible expenses for those with home offices, for such things as electricity, phone and Internet usage. Information about common deductible expenses for specific occupations is available from the Australian Taxation Office.
In short, you are probably entitled to more deductions than you might think and though keeping records may be tiresome, not getting back the money you are entitled to is even less desirable.