Well, it’s that time of year again. The tax man is waiting – are you prepared?
Just like going to the dentist, getting your tax return done is one of those things that nobody really likes but that can’t be ignored.
To ensure your visit to your accountant is as pain free as possible this year, follow these simple steps and maximise your tax return.
Know what you can claim
Knowing what you can and can’t claim is the first step to ensuring you maximise your tax return.
The deductions available to you vary depending on your occupation, so it is important to do your research.
The Australian Taxation Office (ATO) has information on its website (www.ato.gov.au/individuals) that breaks down deductions based on individual occupations.
This should be your first stop when preparing your tax return as it will help you work out which receipts to keep and give you a better understanding of deductions you might not have considered.
Sort through the shoebox
While the thought of shoeboxes full of receipts might seem amusing it’s not a bad way to keep track of your expenses through the year.
However, when it gets closer to tax time you might want to summarise your receipts in an easy-to-use spreadsheet that will save your accountant time and ensure you don’t miss out on any deductions.
Set out your spreadsheet using columns for date of purchase, reason for use and dollar amount.
This will give your accountant a clear idea about what can be claimed and you will be able to quickly reference and produce your receipts if needed.
Prepare for the new financial year
While it might be tempting to go out and splurge when you receive your tax refund, you should seriously consider using some of your refund to pay off credit cards or pay down your mortgage.
Even if you only use some of your refund to pay down these debts you could save yourself thousands of dollars in interest in the long run.
For instance, a borrower who takes on a home loan of $300,000, with a standard variable interest rate of 6.15 per cent, will pay $288,151 in interest over the life of the loan – that’s nearly as much as the principal sum itself!
If you receive a refund of $1,000, putting this towards your home loan could save you approximately $3,600 in interest repayments and wipe two months off the lifespan of the loan, based on the example above.
Multiply this by the life of the loan and you will see some pretty significant savings.
To find out more about how your tax return could save you thousands, contact us today!