There is no reason why you should not take advantage of legitimate means to minimise your tax. Here are a few of the sometimes overlooked tax breaks.
Record keeping: This one might sound pretty basic, but ensuring that you have a good record keeping system in place to record all of your income and deductible expenses is an important and often overlooked part of keeping your tax as low as possible. You need to be sure that you can justify the deductions you are claiming (excluding for individuals, work related expenses less than $300) if the Tax Office ever asks and also so you can be sure you don’t forget about expenses that might be able to claim.
Family tax benefits: Watch the income thresholds apply to you and know when the benefits phase out. Check the rates and thresholds at www.humanservices.gov.au. This may affect what you decide to claim and where you have flexibility, your income levels.
Child Care Benefit & Rebate: If you are eligible, this rebate can help to cover part of your child care costs. The child care benefit is adjusted annually in line with the CPI while the child care rebate is based on 50% of your out of pocket expenses up to $7,500 per child per year.
Child Dental Benefits Schedule: Financial support is available for basic dental services for children aged 2–17 from January 2014 capped at $1,000 per child over 2 consecutive calendar years. The benefits will cover a range of services including examinations, x-rays, cleaning, fissure sealing, fillings, root canals and extractions.
Parental Leave Pay & Dad / Partner Pay: 18 weeks financial support is provided to help eligible parents take time off work to care for a newborn or recently adopted child while up to 2 weeks government funded pay for supporting dads or partners when they are on unpaid leave from work or are not working. The pay rate is currently $657 per week before tax.
Collect the Government super co-contribution: If you are working and earn $34,488 or less, you could be eligible for the maximum super co-contribution of $500 when you do make a $1,000 non-concessional (after tax) contribution. If you earn more than this but less than $49,488, your maximum entitlement will reduce progressively between $34,488 and $49,488.
Collect the spouse contribution: If you contribute a minimum of $3,000 to your non-working or low income partner’s super before 30 June you could receive a tax offset of up to $540. The tax offset starts to reduce if your spouse is earning more than $10,800, and cuts out when your spouse earns $13,800 or more per year.
Make a personal deductible super contribution: If you earn less than 10% of your income from eligible employment (this broadly means as an employee), then you are eligible to make deductible personal contributions to your super. This means most self-employed or not employed people can claim the deduction.
Transition to retirement: If you are over 55, the combination of salary sacrificing pre-tax income into super and drawing an income from super benefits can be very tax effective while your cash flow remains the same. Talk to a licensed financial planner about this strategy and whether it will work for you.
Mortgage offset account: This is more often viewed as a strategy to cut interest costs and the length of the loan on a mortgage. The other side of the equation is a tax saving on money that would otherwise have been in a savings account and earning interest, on which you would be taxed at your marginal tax rate.
Medicare Levy Surcharge: If you and your partner’s income exceeds the surcharge threshold you may be up for the Medicare levy surcharge. If you look like exceeding the limit take out private health insurance.
Home Office: Working from home means you’re potentially eligible to claim a number of expenses, depending on whether you run a business or just do a few hours a week from home. Things like gas and electricity costs, office items like a printer, scanner, computer, shredder and even a desk lamp can all be claimed, as can work-related phone expenses. Home office furniture like desks, chairs, footrests, heaters or light fittings can also be eligible for a deduction, although these may need to be depreciated over time depending on the cost. Be very wary before claiming rent or part of your mortgage costs as this can adverse consequences down the track when you sell the property. If you do run a business from home as opposed to just work from home occasionally, it’s best to see advice.
Don’t forget to claim car expenses: If you use your car for work, keep a log book AND keep all your expenses for the year. This will allow you the option of selecting the best method of claiming the cost of running your vehicle, rather than just the easiest method.
Investment Property: If you have an investment property, do not forget that in many cases depreciation on the building can be claimed. This is often overlooked.
You can also pre-pay the interest on your investment property so that you can claim the deduction upfront.