Tax time is an important time of the year when accountants and the Australian Taxation Office get busy computing, processing, and lodging tax returns. For some people, terms such as tax return and income tax may be too much to handle, considering the various factors that come into play during tax time. In this article, we have listed five things to know in preparation for tax time.
Manage your investments
The tax you pay in a particular year can be affected by the timing of the sale of any investments including managed funds and shares.
1. Know what documents to bring for your tax appointment.
To make the process quicker and more convenient, make sure to take a look at your tax return from the previous year. With a copy of that tax return, you’ll be able to know the categories of income, tax offsets, as well as deductions that are applicable to you.
In general, for new clients, bring your most recent tax return and notice of assessment. Take note that there are different necessary documents to bring based on income, expenses, and rental properties. Other relevant information that you need to prepare are updated contact details, remote zone allowance, if applicable, private health cover statement, spouse details, net medical expenses which are more than $2,000, and dependent details.
2. Prepay your expenses.
Some people can claim work-related or other deductible expenses against their income in the present financial year by bringing them for the next financial year. Speak to your accountant to see if this works for you.
3. Consider managing your investments.
The tax people pay in a particular year can be affected by the timing of the sale of any investments including managed funds and shares. For instance, the profit from an investment becomes taxable income which can push you to the higher tax bracket. Also, if you intend to put a non-performing investment on sale, you may be able to use the capital loss to lower that tax on any capital gains if you sell it before June 30. It’s worth talking to your financial advisor about this.
4. Lodge your tax return online.
While it is not required, lodging your tax return online will make it easier to streamline the process. You can use the ATO software for this. Another benefit of lodging it online is that when you know that you have a tax refund, you’ll be able to claim it quickly. If you have a tax accountant, it might be worth chatting to them first prior to doing this, as this might be a service that they offer that you are already paying for.
5. Make additional contributions to super.
As the financial year comes to a close, some people want to make more deductible contributions to their superannuation. This can help lower their overall tax bill.
If you want to be prepared for tax time, it’s best to speak to your financial advisor and tax advisor in advance. They can review your situation and give you some tips to get prepared early! The more prepared you are upfront, the less work for them, which might save you money.
Do you know other tips when it comes to income tax in Australia? Share your ideas in the comments section.