How many times have you heard these phrases. ‘Can you believe it’s January?’ ‘Can you believe easter has come and gone?’ ‘It will be Christmas before you know it’. We may hear these phrases from the people around us or say these phrases ourselves. Whatever the case, life is passing us by quicker than ever. As life passes us by we always need to remember that we sometimes need to stop and smell the roses.

Now onto this weeks topic. Can you believe we are coming up to the end of financial year? That means tax time, our favourite time of year or your least favourite time of year depending on your situation. Even though there are still just under 2 months to go before we reach the end of the financial year, there is no harm in preparing from now.

The ATO calculates your tax on what’s called a ‘taxable income’, this is basically the amount of money you received LESS any deductions you had in the financial year. Basically if you earned a wage of $50,000 and spent $10,000 on eligible deductible items, then your taxable income will be calculated on $40,000 ($50k – $10k = $40k). So if your employer has been withholding tax based on $50k then simple maths will tell us that you should receive a refund.

Let me explain some examples of deductible items

• Income Protection – This is great way to reduce your tax and also protect your income in the event of an accident or sickness. You can claim the premium as an expense. It’s never too late to protect your income and the sooner you take out the insurance the cheaper it is as the premium increases as you get older. Protecting your income is a great way to ensure your lifestyle continues while you are unable to work and you can continue to meet your financial commitments.
• Property Investment Expenses – There has been a great deal of talk in recent times to not allow property investors to claim negative gearing on their investments. Let me explain negative gearing – Negative Gearing is borrowing money to fund an investment purchase without receiving enough income to cover interest, depreciation and other expenses. The investor can claim the difference of the expenses incurred and the income received as a deduction on their tax return. Be sure to include all allowable expenses into your tax return. That brings me to the next item
• Depreciation – Property investors can claim the depreciation on their property as an expense item, just like the interest incurred. You can’t just claim any amount. You will need to obtain a depreciation schedule which outlines how much the depreciation amount is, specific to your property. Your accountant will then use that schedule every year to claim the correct amount. The government announced some changes to this regarding new properties, let me know if you would like more information.
• Charities– This is your chance to give to that charity you have been thinking about. The amount you donate (as long as its more than $2.00) can be claimed as an expense on your tax return. This is great as you will be giving to a needy charity and also benefiting from the tax deduction, make sure you keep your receipt.

In order to receive the maximum tax refund, the plan should be that you have as much as deductible expenses claimed so that your overall taxable income reduces. Not all expenses are acceptable to everybody, so that’s why we always say to speak to a good accountant.

‘In this world nothing can be said to be certain, except death and taxes’ 

Benjamin Franklin