Ah, tax time. It might be an annual event, but for a lot of us, June 30 still comes as an unwelcome surprise. From digging through armfuls of receipts to tracking down a good accountant, tax time can feel complex, confusing and overwhelming.
But, lodging your tax return doesn’t have to be a hassle. In fact, with a bit of planning and preparation, you can get all your paperwork sorted and ensure you’re maximising your returns, too.
And that starts now. Whether this is your first tax return or you’ve done this many times before, we’ve pulled together your go-to tax time checklist of all the steps you need to take before June 30 to make this tax return your best one yet.
1. Consider making any tax-deductible purchases
Did you know there is a range of expenses that can be claimed as tax deductions? From printer ink to a new work laptop, you may be able to account for these in your tax return (and potentially lower your tax bill).
Before we dive into the nitty-gritty of what purchases are tax-deductible, it’s important to note that your expenses have to tick a few boxes first.
In the words of the ATO, any work-related expenses that you plan to claim as tax deductions need to:
- Be purchased with your own money (and not reimbursed by your employer)
- Be directly related to helping you earn an income
- Have records to prove them (usually a tax invoice or receipt)
Broadly speaking, some of the key purchases that you may be able to claim as tax deductions include:
- Computer gear and stationary (such as printer paper and ink)
- Home office equipment (things like laptops, phones, and printers)
- Work-related education and training courses
When it comes to claiming these items as deductions, there are different rules depending on how much it costs. That means:
- Items under $300 can be claimed for an immediate deduction
- Items over $300 can only be claimed for a decline in their value
If you’re unsure what category your purchases will fall into, have a chat with your accountant as they’ll be able to offer specific advice tailored to your unique situation.
2. Proactively pay any tax-deductible business expenses
Do you run your own business? If so, it could be a wise move to pre-pay some business expenses to claim as a tax deduction in your upcoming tax return.
Typically, these deductions relate to subscriptions, lease/rent payments and insurance premiums that can be paid in advance for services delivered in the next financial year. If you have the cash to spare, making these payments in advance might help to lower your tax bill.
As you can imagine, there are stacks of specific rules that apply. We’d suggest chatting to your accountant to see if you are eligible for this deduction before making a claim in your tax return.
3. Boost your super balance with tax-deductible contributions
We’re passionate about helping everyone grow their super balance, and this next step has some serious tax benefits too. If you earn over $37,000 per year, you can make super contributions from your pre-tax income and claim these as deductions in your upcoming tax return.
These are known as “concessional contributions” and for the 2020/21 financial year you can make up to $25,000 in this type of contribution without incurring additional tax. Particularly if you’re self-employed, these contributions are taxed at a much lower rate than your personal tax rate, which makes it a smart way to boost your super balance.
If you’re planning to claim these personal contributions in your tax return, make sure to check your eligibility, make a payment and then notify your super fund with a Notice of Intent to Claim form. Make sure to get this in before June 30 to ensure you can make a claim in your FY 2020/21 tax return. At Verve we’re encouraging members to ensure they’ve made any contributions by June 25th to ensure you make the EOFY deadline for 2020/21.
Looking for other ways to boost your super balance in 2021? Check out our complete guide to topping up your super. And if you’re a Verve member, dive into Step 3 of Verve’s Money & Mindset program to help work towards a retirement filled with freedom, choices and opportunities.
4. Give back to a registered charity
That’s right, supporting organisations working for good can actually help you out at tax time. That’s because donations to certain charities can be claimed as deductions in your individual tax return.
But, not all charities are eligible for these tax benefits. If you’re looking to claim your donations as tax deductions, make sure to check that the organisation you’re supporting is endorsed as a Deductible Gift Recipient (DGR).
Plus, you’ll need to check that the donation you’re making is what’s called a “genuine gift”, which means that you can’t receive a benefit from your donation (such as buying raffle tickets or food items from charity stalls).
Want to check which charities have a DGR endorsement? Head to the ACNC Charity Register and search by the organisation’s name or ABN. Once you find a charity you want to give back to, you can click through to see if your donation will be tax-deductible.
5. Gather all your documents and expense claims ahead of time
Here’s the thing: June 30 will be here before we know it. So, now is the time to start gathering your paperwork and getting your files sorted to give yourself the best chance of a smooth, stress-free tax return.
Whether you’re meeting with an accountant or doing your own tax return online, here are some of the key documents to have ready:
Income Documents: these are all the forms related to any income you’ve earned this financial year, including:
- Payment Summaries and Income Statements: chat with your employer to find out which documents you’ll receive (typically, you’ll access this after July 31st via your myGov portal).
- Lump-Sum and Termination Payment Summaries: if you’ve left or changed jobs this financial year.
- Government payment summaries (if you received financial support this year).
- Interest income from banks and building societies
- Dividend statements for dividends received or reinvested
- Annual Tax Statements from Managed Funds
- Annual Statement from Super Funds
Other Income: this relates to any other sources of income outside of your main job, including:
- Rental Properties
- Business Income
- Foreign Income
- Capital Gains
- Employee Share Schemes
Deductions: this covers all work-related expenses that you’re looking to claim as deductions, including:
- Motor vehicle expenses
- Travel (such as fares and accommodation)
- Uniforms or work-wear
- Self-education or professional development training
- Union, registrations, tools, subscriptions or memberships
- Home office gear as well as seminar or conference costs
- Phone, computer or interest expenses
- Donations to registered charities or building funds
- Income protection insurance premiums
Offsets and Refunds: this covers everything from
- Health insurance and rebate entitlement statements
- IAS statements or details of PAYG instalments paid (if you run your own business)
- Spouse details including taxable and exempt income
Tax Refunds: make sure to have your bank account details (including BSB and account number) ready when lodging your tax return so you can claim any refunds you’re entitled to.
6. Get clear on tax time deadlines
Last, but not least, it’s time to grab your diary and get your tax time dates in the calendar.
If there’s one date you remember, make it this: October 31st. This is your tax return due date, which means you need to have lodged your tax return for FY 2020/21 by this date (if you’re DIYing your tax return).
However, if you’re planning to use an accountant, this deadline can be extended all the way until May 15th, 2022.
If you miss this deadline, you may be hit with a late lodgement penalty. This typically costs $222 for the first 28 days after this due date, and increases by another $222 after each subsequent 28- day period (capped at a maximum of $1,110 in fees).
The moral of the story? Get your tax return lodged by October 31st to skip these unwanted fees and penalties.
So, there you have it. After completing this tax time checklist, you’ll be ready to lodge your tax return with confidence this year. And stay tuned, we’re putting the finishing touches on our Ultimate Guide to Tax Time, which expert tips and tricks about how to maximise your tax return and how to set yourself up for success this new financial year.