OK, so it’s dreaded tax time again... but don’t panic! We’ve asked an expert for help. Heather Smith is a Fellow of the Association of Chartered Certified Accountants; and the Principal of ANISE Consulting in Brisbane.
Heather has compiled this ‘Top 10’ list as a guide for how we can all do our own tax properly. But remember, if it’s all getting too hard...see a tax accountant!
The Australian Taxation Office offers free tax preparation software. ETAX is an easy way to prepare individual income tax returns and lodge them online. They have developed an informative video that provides an overview of how to use their ETAX software.Watch the ETAX video here.
If you prefer dealing with paper, your local newsagency has free TaxPack 2010 and TaxPack 2010 supplement booklets available to help you complete your income tax return.
Remember to ask for a tax receipt if you pay for something that may be claimable.
Your paperwork needs to be safely stored for generally 5 years. If you lose a tax deductible receipt, you may lose the ability to claim it!
Don’t use highlighters, or leave receipts in the heat or next to plastic wallets, as it will cause them to fade. If you are technically minded it is acceptable for you to scan receipts or use a service like Shoeboxed.
Typically each year you require the same sort of information. For easy reference keep each financial year paperwork in its’ own file.
Use dividers to separate and identify; general tax information, bank statements, investment accounts, declarable income, shares, superannuation information, claimable receipts, government payments.
Use an excel spreadsheet to record your income and expenses during the year, or an easy online solution like XERO Personal.
Once your ETAX software knows your tax file number, it will ‘auto fill’ your information based on data collected from other institutions, such as banks, employers, other government departments etc.
It is worth cross-checking that the pre-filled information is correct - that is, that your financial information has been properly linked to your tax file number.
Make sure you receive payment summaries (previously known as group certificates) from all employees in this financial year; they should be issued by14th July.
Understand what work related expenses you can claim, and those that are unique to your industry; airline stewards are allowed to claim stockings, hairdressers can claim protective aprons and gloves, while teachers can claim suntan cream.
If your claims exceed $300 you must have written evidence to substantiate your claims.
Tax rebates, such as the private health insurance rebate, reduces the tax you owe and may be offered as an incentive, as a credit for tax already paid, or to relieve personal circumstances.
Donations over $2 in value are tax deductible; just remember to keep those receipts!
If you are unsure, you can ring the ATO on the personal tax line 13 28 61.
Save money and submit your own income tax return online or by snail mail by the31st October 2010.
So you know you need to budget - but where do you start?
“In a nutshell, you need to keep a good eye on what money comes in and what goes out,” explains Certified Financial Planner Greg Cook.
“You can search online and download a simple ‘household budget planner’ to work on your computer, or do it the old fashioned way by writing everything in a book.
“Document your income and all your expenses and you’ll soon see where all your hard earned money is going.
“And when it comes to making savings there are two possibilities. Firstly look at some of the bigger bills like insurance policies and telephone contracts … maybe they were the best deal at the time, but do your research to see if things have changed.
“Then there are the ‘smaller’ things like being honest about how many take-aways you have each week!”
Greg’s Top Tip: “Whenever possible, employ the discipline of saving first and spending second. Even if it’s a modest start, you can ramp things up as time goes by.”