As an accountant, I used to do tax planning in June, right at the end of the financial year. While this may be of benefit to business, for the individual it is usually too little too late. By now 11 months have passed and receipts have been lost and people have either been unaware of the deductions that they are entitled to, or potential deductions have long been forgotten.
Does the following sound familiar to you? What deductions are available to me? Am I maximising my tax return? Can I claim this? Where did I put those receipts? I don’t have the time to go looking for all that paperwork. My accountant’s bill is how much?
If this is all too familiar, now is the time to get organised for next year’s tax return.
Invest a couple of dollars in a folder with the plastic pockets. You can then keep all your receipts secure in the one place. Place a tax checklist (you can download the frugal and thriving tax checklist here) in the first plastic pocket, to serve as a reminder of what you may need to file in your tax folder.
Either organise your receipts in the order preferred by your accountant, or organise them according to the flow of a tax return (see the tax checklist). As accountants often charge according to how much time they take to complete a return, the more organised your paperwork, the less your accounting bill will be.
For the super organised, keep a summary page in each plastic pocket with a heading of what is in that pocket and a list of receipts or statements. For example, you may be claiming a deduction for dry-cleaning. Make a heading on the summary page ‘dry-cleaning’ and list the date and amount on your summary page each time you add a receipt to your folder. Organise the receipts in the order they appear on the summary page and place them in the pocket behind the summary. This is can be useful, but is by no means necessary. For the time poor or for people with basic returns, placing the receipt in the relevant pocket is enough.
If you’re not sure if an expense is deductible or not, keep the receipt anyway. If it isn’t deductible, then your accountant can ignore it, if it is they won’t know to include the deduction on your tax return if you don’t provide a receipt.
At its most basic your folder should include:
- A tax requirements checklist
- End of year statements of income: employment, dividends, bank interest, managed fund statements, government allowances and pensions etc.
- Business income or personal services income
- Sale and purchase documents of assets disposed of during the year. For example, if you sold shares this year, this will need to be reported for capital gains tax purposes. Not only do you need the statement regarding how much you made on the sale of these shares, you will also need the purchase documents (regardless of when the shares were purchased) in order for the capital gain and any discount available to be calculated. In the case of investment properties, you will need both the sale and the purchase contract as well documents regarding all relevant expenses.
- Receipts to support deductions
- Log book or record of work related travel (an excel spreadsheet or a simple piece of paper that records trips is fine. By the way, Google Earth can be very helpful in calculating trip distances for logbook records.)
- Private medical insurance tax details, Childcare statements, HECS statement, PAYG statements etc.
- The previous years’ tax returns and notices of assessment
Next, check out the tax deductions that are available to you. There are too many for me to list here, so check out the industry and occupation guide to deductions available at the Australian Taxation website. This lists a variety of occupations and potential deductions available to each one. Also, see the checklist for other possible deductions that you can claim. For claims under $300, it is not necessary to keep receipts, however the ATO may ask you to explain how you worked out your claim and why your claim is reasonable based on the requirements of your occupation.
For further information about what paperwork you may need to keep in order to maximise your tax savings, speak to your accountant or have a read through the ATO website. Below are some links to help you find further information regarding:
- specifics on workplace deductions
- income and relevant deductions for rental properties
- information on shares and tax
- information regarding capital gains
- tax for individuals