Top Tax Tips for Tough Times

Mark Morris writing in the CPA magazine "In the Black" in June 2009 suggests the following which have been paraphrased:

• Defer Income and accelerate expenses

  Carefully look at regulatory changes for the coming financial year to ensure you maximise your position. Eg where concessions/ advantages are to be withdrawn/reduced then you may need to act before the cut off period.

• Claim all work- related deductions

  The time taken in collecting and retaining all relevant expenditure verification is worth the effort. Do you know what expenditure is allowable within your industry? Are there any self education expenses allowable for outlays made during the year?

• Identify eligible home office expenses

  Do you have an area specifically set aside as a home office?  Have you kept a diary of hours worked in the home office? What is the current rate set by regulation to be applied to the total hours worked at home? What items are depreciable and at what rate?  Note that the deductibility position is different if you are running a business from home.

• Maximise Motor Vehicle deductions.

  Firstly determine work related mileage for the year. If under 5000 kms you have the choice of claiming at an annually adjusted rate per km or alternatively, via use of log book records, a proportion of total travel costs can be allowable where all receipts are retained.  For  travel over 5000km  pa it may be possible to claim one third of  actual car expenses or 12% of the original cost of the car  without the need for a log book. Note that travel from home to your place of work is not allowable. Keep all documentation so that, with assistance, you can determine which is the most advantageous method for you.

• Rental Property deductions.

  Make sure you keep all evidence of expenditure. Apart from normal running costs, be aware that you may be eligible to write off the cost of certain buildings, depreciating assets and borrowing costs over time.

• Claim relevant non work related deductions –

  Fees to a registered tax agent and annual financial planning fees are tax deductible in the year paid (provided  the latter is paid in relation to  income producing assets in the client’s personal name). Interest paid to finance share purchases are generally allowable.

• Depreciation of Tools

  where tools are used for work and are not re-imbursed by the employer then depreciation and or investment allowance claims may be allowable. Special and short term additional concessions are available for the self employed.

• Maximize allowable tax offsets

  .What are your entitlements?  Depending on age, income levels, income of a spouse etc, there are a variety of Income Tax (and potentially Social Security concessions) available. However, eligibility is based on a variety of differing criteria for differing concessions...  The range of tax offsets include dependant spouse rebate, low income rebate, mature age worker rebate, senior Australian tax offset, the medical expenses offset, the private health insurance rebate and a superannuation contribution rebate for a low income spouse.  For the self employed, there is a new rebate of tax where business income does not exceed $ 50,000 and other criteria are met.

• Tax Effective superannuation Contributions. 

  A self employed person can  claim tax deductible superannuation contributions to age 75, subject to aged based ceilings and  that less than 10% of gross income is coming from employment income including reportable fringe benefits. As the 2010 year, proposed legislation includes employer contributions in the ceiling levels and penalty provisions are punitive for excess contributions. Care is required not to venture into penalty territory in the case of employees in particular.

• Use Capital Losses

   Capital losses can be either applied against current year capital gains or carried forward. . Where capital gains do exist then advice should be sought on whether to realise non cashed-out capital losses to minimise tax on the current year capital gain.