Do you know what tax deductions and offsets you are eligible for? The following tips may help you reduce your tax liability in your 2014/2015 return.
By Paul Drum
Claim work-related deductions
Claiming all your work-related deduction entitlements may save you considerable tax. To do so, make sure that you have all the necessary receipts or credit card statements. Typical work-related expenses include employment-related landlines, mobile phone and internet usage, computer repairs, union fees and professional subscriptions.
Claim home office expenses
When part of your home has been set aside primarily or exclusively for work, a home office deduction may be allowed. Typical home office costs include heating, cooling, lighting and even depreciation of your office equipment.
To claim the deduction, you must have kept a diary for a representative four-week period of the hours you worked at home. For more information on home office expenses see Australian Taxation Office (ATO) website .
Claim self-education expenses
Self-education expenses can be claimed provided the study is directly related to either maintaining or improving your current occupational skills or it is likely to increase your income from your current employment. However, if you obtain new qualifications in a different field through study, the expenses incurred are not allowable.
Typical self-education expenses include, amongst others, course fees, textbooks, stationery, student union fees and the depreciation of assets such as computers and printers.
However, any Higher Education Loan Program (HELP) repayments are not deductible. You must also disallow $250 of self-education expenses, which can include non-deductible amounts such as child-care costs.
Claim depreciation deductions
Immediate deductions can be claimed for depreciating assets that cost under $300 to the extent the asset is used for an income-producing purpose such as earning salary and wages or rental income. Such assets include tools, calculators, briefcases, computer equipment and technical books purchased by an employee or minor plant items purchased by a landlord.
Claim and maximise motor vehicle deductions
If you use your motor vehicle for work-related travel, and your annual claim for kilometres travelled does not exceed 5,000 kilometres, you can claim a deduction for your vehicle expenses on a cents per kilometre basis. The allowable rate for such claims changes annually so you need to obtain this year's rate from the ATO. Such claims must be based on reasonable estimates.
If your business travel exceeds 5,000 kilometres, it may be possible to claim one-third of your actual car expenses or 12 per cent of the original value of the vehicle without a log book.
Professional year-end tax resources from CPA Australia
Alternatively, you may be able to claim a deduction for your total car-running expenses for that travel. However, such claims are only available if you have kept a log book, odometer readings and receipts.
You can contact your CPA Australia-registered tax agent to clarify what constitutes work-related travel, and which of the above methods can be applied to maximise your tax position.
Claim rental property deductions
Landlords can claim immediate deductions for a range of expenses such as:
- interest on investment loans
- land tax
- council and water rates
- body corporate charges
- repairs and maintenance
- agent's commission
- pest control
- leases (preparation, registration and stamp duty)
- advertising for tenants
- reasonable travel to inspect properties.
Landlords may be entitled to claim annual deductions for the declining value of depreciable assets (such as stoves, carpets and hot-water systems), and capital-works deductions spread over a number of years (for structural improvements, like remodelling a bathroom).
Maximise tax offsets
Tax offsets directly reduce your tax payable and can add up to a sizeable amount. Eligibility for tax offsets generally depends on your income, family circumstances and conditions of particular offsets.
For 2014/2015, taxpayers should check their eligibility for tax offsets, which can include the low-income tax offset, senior Australians and pensioners offset and the offset for superannuation contributions on behalf of a low-income spouse with their CPA registered tax agent or the ATO website (www.ato.gov.au).
Maximise your super contributions
Gone are the days when you could wait until the kids left home and the house was paid off to top up your super with additional contributions. With the introduction of the contribution caps in 2007, you should consider contributing as much as you can each year, up to the cap, to maximise your super.
The concessional contributions cap for 2014/2015 is $30,000 if you are under 49, and $35,000 if you are aged 49 or over. Concessional contributions include any contributions made by your employer, salary-sacrificed amounts and personal contributions claimed as a tax deduction by self-employed or substantially self-employed persons.
If you're making extra contributions to your super and breach the concessional cap, those contributions will be taxed at your marginal tax rate. However, you can have the excess contributions refunded from your super fund.
Importantly, don't wait until 30 June to make your contributions as your super fund may not receive them in time.
The contributions tax on concessional contributions for high-income earners is effectively doubled to 30 per cent if their combined income plus concessional contributions exceed $300,000.
Your super can also be boosted by non-concessional, or after-tax, contributions. While not as tax effective, you are still getting more money into the concessional-taxed super environment. The non-concessional contribution cap is $180,000 for 2014/2015, but you could also take advantage of the 'bring forward' provision if you are under 65 and utilise the cap for the next three years to contribute up to $540,000.
If you breach the non-concessional cap, the excess contributions will be taxed at the top marginal tax rate. However, you can now have any excess non-concessional contributions made since 1 July 2013 refunded from your super fund.
Importantly, don't wait until 30 June to make your contributions as your super fund may not receive them in time. As a result, those contributions will count towards next year's contribution caps, which could result in excess contributions and an unexpected tax bill next year.
Self-employed? Consider tax effective superannuation contributions
A self-employed person will be able to claim their contributions to a complying superannuation fund as fully tax deductible up to the age of 75 in 2014/2015. However, such contributions will only be deductible if less than 10 per cent of the total of a person's assessable income, reportable fringe benefits or reportable employer superannuation contributions is attributable to their employment. Such a deduction cannot increase or create a tax loss to be carried forward. Employers can also claim deductions for superannuation contributions made on behalf of their employees.
Consider the superannuation co-contribution
An individual likely to earn less than $49,488 in 2014/2015 should consider making after-tax contributions to their superannuation to qualify for the superannuation co-contribution. The government will match after-tax contributions – fifty cents for each dollar contributed – up to a maximum of $500 for a person earning up to $34,488. The maximum then gradually reduces for every dollar of total income over $34,488 to nil at $49,488.
Consolidate your super
It makes a lot of sense to have your super in one place. You'll reduce your fees, only receive one lot of paperwork, and you only have to keep track of one fund. You can also use the same fund in any job you may have.
Compare your funds’ fees and charges, investment options and life insurance cover to work out which best suits you before consolidating them into one fund. You can look at past investment performance as well but remember it is no guarantee of how the fund will perform in the future.
Once you've chosen the fund you want to keep, contact them and they can help transfer the money from your other super funds.
If you've moved around or changed jobs occasionally, your old super fund may have lost track of you and you may miss out on some of your super when you need it. To find your lost super, use the SuperSeeker System on the ATO website
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