Planning for a New Financial Year
In a world that’s constantly changing, it’s nice to have some stability. Something certain, like taxes. For citizens residing in Australia who are currently employed, paying tax is one of life’s little sureties. Unless, of course, you have a bank account on a holiday island that has an exotic sounding name.
For the rest of us honest, hard working types, paying tax isn’t really all that onerous. In fact, since tax is deducted automatically by payroll, unless you make a habit of looking at your payslip you’re not even going to notice that a large chunk of what you’d like to be paid has gone missing. The trouble only really starts when you realise that you ought to have been more organised if you were going to have any success in filing your earnings and deductions this financial year.
The good news is that you don’t need to dread tax time. A little bit of planning and organisation can go a long way, especially if you get started early.
1. Know thy tax deductions
Understanding what you can and cannot deduct from your wage each year goes a long way towards helping you plan come tax time.
2. Get a good wallet
You’re going to need something to keep all those receipts in. In fact, get a good wallet and a shoebox. And if you’re really organised, that shoebox will be a filing cabinet with clearly labelled folders which will contain your group certificates, bank statements, receipts, travel logs, health-fund details, investment property accounts and anything else you think might be relevant come tax time. This you’ll keep for five years – just in case you get audited.
3. Figure out your tax threshold
This part is easy. Simply visit the ATO website to view their handy Individual Income Tax Rates table. Once you know what the thresholds are and where your income fits into the big picture you can figure out how many deductions you need to make to bring your income down a level. Work expenses, donating to charity, making co-contributions to your super or undertaking education that’s relevant to your current employment can all help reduce your tax threshold.
4. Get insured
Health insurance is a must. If you don’t have hospital insurance and have a single taxable income of $73,000 or more per year, or a combined taxable income of $140,000 or more, you may be forced to pay an extra 1% in tax charged as the Medicare Levy Surcharge (MLS). This means you’ll be out of pocket by a minimum of $730 a year if you’re a single and $1,460 if you’re a family. Since health insurance is relatively inexpensive, it makes sense for your finances (and your health) to get covered.
Income insurance is also a relevant tax deduction that can help you bring down your tax threshold and protect your family in case of serious injury or death.
5. File on time
This is especially relevant if you think you’re going to owe the ATO any money. Interest charged on late payments have a high penalty rate, not to mention fines and a greater risk that you’ll be audited. By regularly paying on time you’ll reduce your financial burden come tax time.
If you think you’re going to get a refund, do your tax return as soon as possible. You’ll get your money faster and can start making it work for you – not the government. If you owe tax, lodge as late as you can within the lodgement dates and consider using a tax agent as the due date for lodgement will then be extended.
6. Save time and paper – use E-tax
This one is a no-brainer. The ATO now offers an online tax return system which lets you lodge online. You can get your return deposited direct into your bank account rather than waiting for a cheque, and the system makes it easy to save and make any necessary changes. Better still, E-tax provides you with the opportunity to pre-fill your tax return with information held by the ATO, making it easier for you to meet your tax obligations and claim your entitlements.