It’s the end of the financial year, and you know what that means: it's tax time. But don't panic! We're here with some tips and advice for lodging your tax return this year, and also some ideas on how to simplify your next financial year.
Preparing to lodge your tax return
- Get organised with your income and expense documents
Income: This one is obvious - you must declare all income you receive each financial year. This includes your employment income, any investment income, super pensions or annuities, and various other sources of income. It also includes government payments, including those related to COVID such as JobKeeper payments or pandemic leave disaster payments. Be sure to pull together all the documentation you have that records these various sources of income.
Expenses: It’s important to keep records of your financial transactions, especially when it comes to work-related expenses. If you're the kind of person who likes structure and organisation, you probably already have your own system for keeping your receipts all in one place, and we love that! Or maybe you're the type to throw all your receipts in an empty shoebox at the end of every week and then sort through them at the end of the financial year to calculate your expenses. Hey, whatever works for you - we don't judge.
However you've kept track of your records this financial year, now is the time to consolidate those records and get ready to either send them to your accountant or add the info into your tax return yourself.
2. Figure out what work expenses you can claim
This is the bit everyone is interested in - what deductions can you claim in your tax return?
In order to claim a deduction you must have spent the money yourself (and have not been reimbursed by your employer), the expense has to be directly linked to earning your income, and you must have a record of the transaction (which is why keeping records of your receipts is so important). Things like vehicle and travel expenses, uniform, clothing, and dry-cleaning, self-education, tools and equipment can all be claimed as deductions.
Of course, living in these more complicated COVID times means a lot of people are working from home. If you're one of those people undertaking their employment from home there are some further expenses you can claim as deductions. This includes things such as phone and internet expenses, electricity and gas, and depreciation on equipment and furniture in your home that you use for work. There are a few different methods for calculating these deductions. You can read more about these methods and the requirements for claiming work from home expenses on the ATO website, or have a chat with your accountant or tax agent for further information.
3. Plan for the next financial year
Review your outgoing costs: This is also a good time to take stock of where your money is going, and culling those sneaky unnecessary expenses.
How many bank accounts do you have? Do you use all of them? Or do you have one or two that are no longer in use, or that you only have a couple of transactions coming into or going out of each month? Consider merging or closing any accounts you no longer need. It will save you time and effort, and will reduce the amount you spend on fees and interest.
It's also a good time to review your subscriptions. It's easy to lose track of the various subscriptions we maintain: streaming services, phone apps, monthly loot boxes. Often we forget we signed up but continue to pay the ongoing subscription anyway. Cancel any subscriptions you no longer want or need or haven't used this financial year and save yourself some money.
Keep better records: If you're one of those organised types we spoke about earlier you can probably skip this section. However, if you're more casual in your approach to record-keeping, you probably tend to be a little blasé about keeping everything in one place and have to scramble to search through your purse or wallet, your desk drawers, your car, to find them all come tax time. Don't worry, we get it. We have a few suggestions on simple ways to manage your record-keeping so that you don't need to bother with the EOFY scramble.
It's easy to keep track of receipts these days. Some people use accounting software such as MYOB or Xero to manage their finances.
Others make use of services like Expensify or Xpenditure, which are a little more basic and allow you to upload receipts and expenses in real-time. These services can link into accounting software such as MYOB and Xero, or can be used as their own tracking system.
The ATO also has their own free record-keeping app called myDeductions. This app allows you to keep records of both general expenses (such as claimable gifts and donations, or the cost of having your tax affairs managed by an accountant) and work-related expenses (such as any vehicle trips you make, or tools and equipment you purchase). You can then email these records to your tax agent at tax time, or if you do your own taxes, you can use them to prefill your tax return.
Let us help you make tax time less stressful
However you go about it, consolidating your accounts and keeping good records of your income and expenses can make tax time a much less stressful and more efficient experience.
Save time, stress, and confusion - have Profacc Accountants prepare your tax return for you and help you plan for the next financial year. Speak to our team of experienced accountants