Our top 5 tips on how to minimise tax…

No one likes paying tax, but paying more than you need to is just plain crazy. The good news is that there are some easy things that you can do throughout the year that will make a big difference to your end-of-year tax return. Here are my top 5 tips on how to minimise tax.

Tip No. 1. Make sure you’re claiming all the deductions you’re entitled to

The rule of thumb here is simple. If you spend any money during the year that relates – even partly – to earning your income, keep the receipt! If you’re not sure whether something is claimable, keep the receipt just in case. Come tax time, your qualified Accountant will be able to advise.

We all know the obvious work-related expenses we can claim for – tools or equipment, work uniforms and investment property expenses to name a few – but there are also some more obscure expenses you may not have previously considered. Like these ones:

Sunglasses, hats and sunscreen: These are all tax deductible if your job requires you to be exposed to the sun for extended periods of time. So, if you’re a builder, a sales rep, courier or a landscaper for example, then you may be entitled to claim. But, if your job only has minimal sun exposure, say you need to drive to the odd meeting, then you’ll have a hard time convincing the ATO that those new Ray-Bans are a work-related necessity.

Makeup and personal grooming expenses: If you work in an aircraft cabin or as a performing artist, the ATO considers your personal grooming expenses necessary for your employment. Pilots and flight attendants can even claim for moisturisers and hair conditioners.

Workplace entertainment: Business owners can now claim a range of employee entertainment expenses if used within the place of work. Think Xboxes, dartboards, Foxtel, magazines – anything that’s used by employees to refocus and re-energise during their working day.

Handbags: In a recent ruling by the ATO, you may be able to claim your handbag or briefcase if you use it to carry work-related items like a smart phone, iPad or stationary items. There are stipulations, however, so make sure you talk to your qualified Accountant before investing in a Louis Vuitton.

Vet bills: Your dog may actually be tax deductible, but only if it’s a guard dog protecting a place of business, or a working farm dog. If you’ve got one of these – and not just a family pet – vet and food bills are all tax deductible.

Tip No. 2. Medicare levy surcharge

At Campbell Green, we take a no-nonsense to health – for ourselves and our clients. Health is more important than anything, and yet some people seem convinced it’s more important to insure their car than themselves. You wouldn’t drive a new car home from the showroom uninsured, so give your health the same respect. No one knows what’s around the corner, but if you come up against an unexpected health issue and can’t afford the treatment you need, life gets incredibly difficult.

To counter the ‘health insurance is a waste of money’ argument, let me spell it out. Most Australian taxpayers already pay a compulsory 2% Medicare levy. If you earn over $90,000 for singles, or $180,000 for families, and don’t have private health, you’ll pay an additional 1% levy on top of this. Now, if you shop around and choose the right policy, private health cover should cost less than this 1%. It seems like a pretty easy decision to me.

Tip No. 3. Make your investments tax effective

If you have an investment property portfolio, the way it’s structured has a vital impact on the amount of tax you pay. Navigating the rules and regulations regarding ownership and management of investment properties is complex. And if it’s not done properly, you could incur a hefty – and unnecessary – tax bill.

Considerations such as how the investment is purchased, contract dates and claiming the correct depreciation all affect the tax effectiveness of your investment. If you need expert help, check out my Tip No. 5.

Tip No. 4. Keep good records

I can’t stress how important it is to keep good records. First, anything you claim for must be matched to a receipt that can be provided to the ATO– that’s the law. Second, if you don’t keep records throughout the year, it’s very difficult to remember to claim for items 3, 6 or 12 months down the track. And this can drastically affect the size of your tax refund, or tax bill.

It’s really not that hard to keep records. My advice is to get a simple, centralised filing system and maintain it weekly. Divide the system into all the sections you need – education expenses, work expenses, donations etc. Then, it’s just a simple matter of putting your receipts and information in the right section. This will save an awful lot of stress at tax time, but more importantly, it will help capture absolutely everything you can claim.

Tip No. 5. Always get professional advice

Seriously, if you want to truly minimise the amount of tax you need to pay, leave it to the experts. Tax rules and regulations change constantly and at Campbell Green, it’s our job to always stay completely up-to-date.
Seeing a tax professional will not only save you a whole lot of time and a giant headache, it will also make sure you’re not paying more tax than you should be.

Ps. The cost of our advice is claimable too.

Note: This post is intended for general information purposes only.