Get Ready for Tax time

Get Ready for Tax time

As the end of the financial year in June 2024 approaches, it’s time to start preparing your finances to ensure a smooth transition and maximise your returns. Here’s a comprehensive guide to help you get ready.

Understanding your sources of income.

Begin by thoroughly reviewing all your income sources. This includes your salary, any side gigs, rental income, investments, and other earnings. Knowing exactly where your money comes from will help you get a clear picture of your financial situation and make accurate declarations on your tax return.

Consider what deductions you can claim.

Next, look into the deductions you can claim. Common deductions include work-related expenses, such as travel costs, uniforms, and tools. If you’ve been working from home, you might be able to claim a portion of your household bills like electricity, internet, and office supplies. Don’t forget about education expenses if they directly relate to your job. Keeping good records throughout the year makes this process easier and ensures you don’t miss out on any eligible deductions.

Think about when to sell any investments.

Timing the sale of your investments can significantly impact your tax obligations. If you have investments like shares or property, consider the capital gains tax (CGT). If you’ve made a profit, you’ll be liable for CGT, which is added to your taxable income. Selling investments after holding them for more than a year can reduce your CGT due to the discount available. It’s wise to plan these transactions carefully and possibly consult a financial advisor for the best strategy.

Document your donations.

Charitable donations can be claimed as tax deductions, provided they were made to a registered charity. Keep all receipts and ensure that your donations are above $2 to be eligible. Documenting these throughout the year will save you from a last-minute scramble and help you maximise your deductions.

Understand the Medicare levy.

In Australia, most taxpayers pay a Medicare levy of 2% of their taxable income. Depending on your circumstances, you might also be liable for the Medicare levy surcharge if you don’t have adequate private health insurance and earn above a certain threshold. Understanding how these apply to you can help you plan better and avoid unexpected expenses.

Get your retirement income right.

If you’re receiving retirement income, it’s essential to understand the tax implications. Some retirement income streams are tax-free, while others might be taxable. Ensure you’re aware of how your retirement income is taxed and make any necessary adjustments to minimise your tax liability.

Get your investment property affairs in order.

Owning an investment property comes with various tax considerations. You can claim deductions for expenses like property management fees, repairs, and loan interest. However, it’s crucial to keep detailed records of all expenses and ensure you’re claiming only legitimate deductions. Also, be aware of any capital gains tax if you’re thinking about selling your property.

Topping up your super.

Making extra contributions to your superannuation can be a tax-effective way to boost your retirement savings. Voluntary contributions can reduce your taxable income and potentially save on tax. Check your contribution limits to avoid excess contributions tax and consider salary sacrificing to maximise your benefits.

By taking these steps now, you can ensure that you’re well-prepared for the end of the financial year and make the most of your tax return. It’s always a good idea to consult with a financial advisor or tax professional to tailor these tips to your specific circumstances and get the best possible outcome.